Question 3

BT&T Corporation manufactures telephones. Recently, the company produced a batch of 560 defective telephones at a cost of $8,600. BT&T can sell these telephones as scrap for $8 each. It can also rework the entire batch at a cost of $6,100, after which the telephones could be sold for $19 per unit.

If BT&T reworks the defective telephones, by how much will its operating income change?

Question 2

Aircraft Products, a manufacturer of aircraft landing gear, makes 2,300 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $67 and fixed costs of $65. The valves could be purchased from an outside supplier at $74 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to:

BT&T Corporation manufactures telephones. Recently, the company produced a batch of 560 defective telephones at a cost of $8,600. BT&T can sell these telephones as scrap for $8 each. It can also rework the entire batch at a cost of $6,100, after which the telephones could be sold for $19 per unit. 3 If BT&T reworks the defective telephones, by how much will its operating income change? Multiple Choice eBook Decrease by $4,060 Increase by $4,540 Increase by $6,160 Decrease by $4,540 2 Aircraft Products, a manufacturer of aircraft landing gear, makes 2,300 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $67 and fixed costs of $65. The valves could be purchased from an outside supplier at $74 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to: Multiple Choice eBook Decrease by $43,700. Increase by $43,700. Increase by $73,600. Decrease by $73,600