Use the Following Information for Questions
Ortiz Co If Ortiz Buys the Part from an Outside Supplier, $40,000

question 32

Multiple Choice

Use the following information for questions
Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production: $$\begin{array} { l r } \text { Direct materials } & \$ 55,000 \\\text { Direct labor } & 160,000 \\\text { Variable overhead } & 75,000 \\\text { Fixed overhead } & 175,000\end{array}$$ If Ortiz buys the part from an outside supplier, $40,000 of the fixed overhead is avoidable.
-If the outside supplier offers a unit price of $68, net income will increase (decrease) by

• A) $(10,000).
• B) $125,000.
• C) $(50,000).
• D) $85,000.

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Definitions:

Dash-warning Light

A light or indicator located on a vehicle's dashboard designed to alert the driver about various vehicle conditions or malfunctions.

Air-over-hydraulic Brakes

Brake systems that use air pressure to enhance or actuate the hydraulic brake fluid pressure, combining both air and hydraulic systems' benefits.

Brake Lining Wear

The gradual loss of material from the brake lining due to friction, resulting in reduced braking efficiency and effectiveness.

Hydraulic Fluid Pressure

The force exerted by fluids when contained within a hydraulic system, used to transmit power or motion.