DC Electronics Uses a Standard Part in the Manufacture of Several

question 111

Multiple Choice

DC Electronics uses a standard part in the manufacture of several of its radios. The total cost of producing 30,000 parts is $90,000, which includes fixed costs of $33,000 and variable costs of $57,000. The company can buy the part from an outside supplier for $2.50 per unit, and avoid 30% of the fixed costs.
If DC Electronics decides to outsource the production of the part, how will it impact operating income?

• A) Up $15,000
• B) Down $24,900
• C) Up $132,000
• D) Down $132,000

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Definitions:

Utility Function

A form of mathematical model that orders a person's preferences across a range of products and services.

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Instructional sessions aimed at teaching individuals how to skate on ice, often covering basic skills to advanced techniques.

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Formal instruction in playing the piano, typically involving one-on-one sessions between a student and a teacher.

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The fee, shown as a fraction of the total amount lent, that a lender imposes on a borrower for the utilization of resources.