Question
Walsh Automobile Company fabricates automobiles. Each vehicle includes one airflow sensor, which is currently made in-house. Details of the airflow sensor fabrication are as follows:
Walsh Automobile Company fabricates automobiles. Each vehicle includes one airflow sensor, which is currently made in-house. Details of the airflow sensor fabrication are as follows: Volume 700 units per month Variable cost per unit $8 per unit Fixed costs $13,000 per month A Japanese factory has offered to supply Walsh with ready-made units for a cost of $15 per sensor. Assume that Walsh's fixed costs could be reduced by $3,000 if it outsources and that Walsh will not be able to use the excess capacity in any profitable manner. If Walsh decides to outsource, monthly operating income will ________.
A. decrease by $1,900
B. increase by $13,000
C. decrease by $13,000
D. increase by $5,600
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