Fornelli Inc If Fornelli Inc

question 135

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 $40000 by what amount will its total costs change?

• A)An increase of $40000
• B)An increase of $2500
• C)An increase of $8500
• D)A decrease of $11000

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