Fornelli, Inc If Fornelli, Inc

question 160

Multiple Choice

Fornelli, Inc. can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$ If Fornelli, Inc. can purchase the units externally for $40,000, by what amount will its total costs change?

• A) An increase of $40,000
• B) An increase of $2,500
• C) An increase of $8,500
• D) A decrease of $11,000

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