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Waldorf Company produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part
Waldorf Company produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows: Variable production costs Fixed production costs $16/unit $20/unit The parts can be purchased from an outside supplier for only $28 each. If the part is out- sourced, fixed production costs would be reduced by one-fourth If the parts are purchased from the outside supplier, the annual impact on the company's operating income will be: $24,000 decrease $24,000 increase $56,000 decrease $56,000 increase
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