Harvey Automobiles Uses a Standard Part in the Manufacture of Several

question 124

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks.The cost of producing 40,000 parts is $120,000,which includes fixed costs of $60,000 and variable costs of $60,000.The company can buy the part from an outside supplier for $3.00 per unit,and avoid 30% of the fixed costs.
If Harvey Automobiles makes the part,how much will its operating income be?

• A)$42,000 greater than if the company bought the part
• B)$42,000 less than if the company bought the part
• C)$78,000 greater than if the company bought the part
• D)$78,000 less than if the company bought the part

---

Definitions:

Consistent

Showing steady conformity to specific characteristics, patterns, or behaviors over time.

Operating Philosophy

Operating philosophy is a set of guiding principles and beliefs that dictate how a business or organization is run and how it interacts with its stakeholders.

Goal Or Objective

A specific, measurable, attainable, relevant, and time-bound target that an individual or organization aims to achieve.