MULTIPLE CHOICE:

1.)

2.)

3.)

4.)

Cheong Automobile Company fabricates automobiles. Each vehicle includes one water pump, which is currently made in - house. Details of the water pump assembly are as follows: Volume 1,400 units per month Variable cost per unit Fixed costs $10.50 per unit $10,000 per month An Indonesian factory has offered to supply Cheong Automobile Company with ready made units for a cost of $16.00 for each water pump. Assume that Cheong's fixed costs are unavoidable and that Cheong will not be able to use the excess capacity in any profitable manner. If Cheong decides to outsource, monthly operating income will O A. increase by $7,700 B. C. O D. decrease by $10,000 increase by $10,000 decrease by $7,700