Question
Priestly Automobiles Company fabricates automobiles. Each vehicle includes one wiring harness, which is currently made inhouse. Details of the harness fabrication are as follows: Volume
Priestly Automobiles Company fabricates automobiles. Each vehicle includes one wiring harness, which is currently made inhouse. Details of the harness fabrication are as follows:
Volume | 800 | units per month |
Variable cost per unit | $ 8 | per unit |
Fixed costs | $15,000 | per month |
An Indonesian factory has offered to supply Priestly with readymade units for a price of $14 per wiring harness. Assume that Priestly's fixed costs are unavoidable, but that Priestly could use the vacated production facilities to earn an additional $9,500 of profit per month. If Priestly decides to outsource, monthly operating income will ________.
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