Figure 9-1
Foster Industries Manufactures 20,000 Components Per Year An Outside Supplier Has Offered to Sell the Component for Manufacturing

question 12

Multiple Choice

Figure 9-1
Foster Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follows: $\begin{array}{lr}\text { Direct materials } & £ 150,000 \\\text { Direct labour } & 240,000 \\\text { Variable manufacturing overhead } & 90,000 \\\text { Fixed manufacturing overhead } & -120,000 \\\text { Total } & £ 600,000\end{array}$ An outside supplier has offered to sell the component for £25.50.
-Refer to Figure 9-1. What is the effect on income if Foster purchases the component from the outside supplier?

• A)£45,000 increase
• B)£15,000 increase
• C)£75,000 decrease
• D)£105,000 increase