Voltaic Electronics uses a standard part in the manufacture of different types o
ID: 2553476 • Letter: V
Question
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $110,000, which includes fixed costs of $50,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $1 per unit and avoid 30% 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? OA increase of $55,000 OB. decrease of $55,000 decrease of $15,000 O D. increase of $16,00o OE. increase of $39,000Explanation / Answer
total cost before change - 110,000
total cost after change - 71,000
less estimated profit - 16,000
= 55,000
increase in operating income = 110,000 - 55,000
= 55,000
answer ) A
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.