Question
Harrisburg, Inc. makes a component used in the production of its main product. Details of the component are: Volume Variable cost per unit Fixed costs
Harrisburg, Inc. makes a component used in the production of its main product. Details of the component are: Volume Variable cost per unit Fixed costs 1,200 units/month $11.50/unit $10,000/month Another firm has offered to supply Harrisburg with the component for $16 per unit. If Harrisburg's fixed costs are unavoidable and the firm will not be able to use the excess capacity, what is the effect on monthly operating income if Harrisburg decides to outsource? A. Decrease by $5,400 B. Decrease by $10,000 C. D. Increase by $5,400 Increase by $10,000
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