Yankton Industries Manufactures 20,000 Components Per Year If the Component Is Not Produced by Yankton, Inspection of of the Components

question 89

Multiple Choice

Yankton Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 140,000 \\\text { Direct labor } & 230,000 \\\text { Inspecting products } & 60,000 \\\text { Providing power } & 30,000 \\\text { Providing supervision } & 40,000 \\\text { Setting up equipment } & 60,000 \\\text { Moving materials } & 20,000 \\\text { Total } & \$ 580,000 \\\hline\end{array}$$ If the component is not produced by Yankton, inspection of products and provision of power costs will only be 10 percent of the production costs; moving materials costs and setting up equipment costs will only be 50 percent of the production costs; and supervision costs will amount to only 40 percent of the production amount. An outside supplier has offered to sell the component for $23.50.
What is the effect on income if Yankton Industries purchases the component from the outside supplier?

• A)$25,000 increase
• B)$45,000 increase
• C)$80,000 decrease
• D)$80,000 increase

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Definitions:

Apraxia

A motor disorder caused by damage to the brain, in which a person has difficulty with the motor planning to perform tasks or movements when asked, despite having the desire and physical ability to do them.

Prosopagnosia

A neurological disorder, also known as face blindness, where the ability to recognize faces is impaired, though other aspects of visual processing and intellectual functioning remain intact.

Initiating Action

The process of beginning or instigating a course of action, often involving decision-making and motor functions.

Parietal Lobe

The parietal lobe is a region of the brain involved in processing sensory information related to taste, temperature, touch, and movement.