Use the Following Information for Questions
Clemente Inc An Outside Supplier Has Offered to Sell Clemente the Subcomponent

question 89

Multiple Choice

Use the following information for questions
Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: $$\begin{array} { l l } \text { Direct materials } & \$ 8,400 \\\text { Direct labor } & 11,250 \\\text { Variable overhead } & 12,600 \\\text { Fixed overhead } & 16,200\end{array}$$ An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit.
-If Clemente accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3,600. The increase (decrease) in net income from accepting the offer would be

• A) $150.
• B) $7,350.
• C) $(150).
• D) $(3,600).

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Definitions:

Marginal Utilities

The additional satisfaction or utility gained from consuming one more unit of a good or service.

Consumption Bundle

A combination of various goods and services that an individual consumes over a given period.

Preferences

The subjective tastes and priorities of consumers, influencing their choices among different goods, services, or outcomes.

Income

The total sum of all wages, salaries, profits, interest payments, rents, and other forms of earnings received over a certain period of time.