Vest Industries Manufactures 40,000 Components Per Year

question 80

Multiple Choice

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $12.75.Fixed costs will remain the same if the component is purchased from an outside supplier.
What is the effect on income if Vest Industries purchases the component from the outside supplier?

• A)$270,000 decrease
• B)$270,000 increase
• C)$30,000 decrease
• D)$30,000 increase

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Definitions:

Enterogastric Reflex

A physiological process that slows the emptying of the stomach contents into the small intestine.

Duodenal Wall

The lining of the duodenum, which is the first part of the small intestine immediately beyond the stomach.

Secretin

A hormone secreted by the small intestine, which stimulates the secretion of pancreatic juice and bile.

Intrinsic Factor

A protein produced by cells in the stomach lining that is essential for the absorption of vitamin B12 in the small intestine.