Part P40 Is a Part Used in the Production of Air

question 194

Multiple Choice

Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40: Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. If Jackson Corporation makes the part, how much will its operating income be?

• A)$47,500 greater than if the company bought the part
• B)$20,000 greater than if the company bought the part
• C)$7,500 greater than if the company bought the part
• D)$32,500 less than if the company bought the part

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Definitions:

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