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Part AB18 is a part used in the production of air conditioners at Amna Corporation. The following costs and data relate to the production of
Part AB18 is a part used in the production of air conditioners at Amna Corporation. The following costs and data relate to the production of Part AB18:
Number of parts produced annually30,000Fixed costs$ 100,000Variable costs$ 200,000Total cost to produce$ 300,000Amna
Corporation can purchase the part from an outside supplier for $8.90 per unit. If they purchase from the outside supplier, 70% of the fixed costs would be avoided. If Amna Corporation makes the part versus buying the part what will be the impact on its operating income?
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