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My TV Corporation is presently making part 295 that is used in one of its products. A total of 5,000 units of this part are
My TV Corporation is presently making part 295 that is used in one of its products. A total of 5,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity. $3.50 $7.10 Direct Materials Direct Labor Variable manufacturing overhead Supervisory salary Depreciation of special equipment Allocated general overhead $1.50 $0.10 $5.40 $8.60 An outside supplier has offered to make and sell the part to the company for $24.10 each. The supervisor work exclusively for the division that makes the part. The special equipment used to make the part was purchased 2 years ago. The division is currently operating at full capacity. The company plans to use the facility to make a new TV that will generate 5,000 units at a price of $225 with variable cost of $125. Fixed cost will increase by $350,000. If management decides to outsource part 295 to the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income
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