Gordon company produces 1,00 units of a part per year which are used in the asse

Question

Gordon company produces 1,00 units of a part per year which are used in the assembly of one of it's products Variable manufacturing cost $18 fixed manufacturing cost 12, total manufacturing cost $27 the part can be purchased from an outside supplier at $20 per unit if the part is purchased from the outside supplier, two thirds of the total fixed costs incurred in producing the part can be eliminated , the annual increase or decrease on the company's operating income as a result of buying the part from the outside supplier would be:A) $3,000 increase.
B) $1,000 decrease.
C) $7,000 increase.
D) $5,000 decrease

Explanation / Answer

c

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