Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 35,000 parts is $105,000, which includes fixed costs of $50,000 and variable costs of $55,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income?
A) increase of $11,000
B) decrease of $11,000
C) decrease of $10,000
D) increase of $16,000
A) increase of $11,000
You might also like to view...
Instant messaging is more interactive and immediate than e-mail
Indicate whether the statement is true or false
Firms that want to promote an image of superior quality and exclusivity to customers would most likely pursue a ________ pricing strategy.
Fill in the blank(s) with the appropriate word(s).
Financial accounting information is usually less detailed than managerial accounting information.
Answer the following statement true (T) or false (F)
In general, if investors believe that a company is relatively risky and/or has relatively poor growth prospects, then the company will have relatively high P/E, M/B, and EV/EBITDA ratios.
Answer the following statement true (T) or false (F)