Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units ea

Question

Aircraft Products, a manufacturer of aircraft landing gear, makes 1,000 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $70 and fixed costs of $60. The valves could be purchased from an outside supplier at $77 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to: 2.85 points Multiple Choice Increase by $26,000. Increase by $17,000. Decrease by $9,000 Decrease by $29,000

Explanation / Answer

The Answer is - Increase by $ 17,000

CoststoMake = $70 + $60 = $130

Costs to Buy = $77 + ($60 × .6) = $113

Increase in the operating Income = [ $ 130 - $ 1130 ] x 1000 Units = + $17,0000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.