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Istanbul Company manufactures 80 products per month. Included in each product there is a special device. Istanbul company manufactures the device in-house. The company is
Istanbul Company manufactures 80 products per month. Included in each product there is a special device. Istanbul company manufactures the device in-house. The company is considering the possibility of outsourcing the production of the device in order to ciose down some of its facilities and reduce the administrative costs. At present, the variable cost per unit is $280, nd fixed costs are $54,000 per month. Assume that if it outsources, fixed costs could be reduced by 60%. The production manager advised the company to contract with a foreign supplier who offered a contract cost of $400 per unit. If it outsources the special device, how would that affect operating income? A) improve by $32,400. B) remain the same C) decline by $22,800. D) improve by $22,800. E) decline by $20,800
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