Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mud Masters manufacturers winches for use in off-road vehicles. The company manufacturers 30,000 winches annually with each winch containing several key operating parts. An outside
Mud Masters manufacturers winches for use in off-road vehicles. The company manufacturers 30,000 winches annually with each winch containing several key operating parts. An outside vendor has approached Mud Masters offering to sell a key part for $61.00. If Mud Masters chose to buy the part from the outside vendor, they believe that they could rent the space currently utilized to produce the part to another company for $120,000 per year. Annual production costs for the part are as follows: Direct materials $30.00 Direct labor 17.50 Variable overhead Fixed overhead 6.00 If Mud Masters decides to purchase the part from the outside vendor, what will be the effect on the company's operating income? 9.00 O $15,000 decrease $105,000 decrease O $45,000 decrease $165,000 increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started