Valuable Electronics Uses a Standard Part in the Manufacture of Different

question 146

Multiple Choice

Valuable Electronics uses a standard part in the manufacture of different types of radios manufactured by it The total cost of producing 25,000 parts is $95,000, which includes fixed costs of $40,000 and variable costs of $55,000. The company can buy the part from an outside supplier for $3 per unit, and avoid 20% of the fixed costs. Assume that free factory space can be used to manufacture another product that can earn profit of $15,000. If Valuable outsources, what will be the effect on operating income?

• A)increase of $3,000
• B)decrease of $12,000
• C)decrease of $8,000
• D)increase of $5,000

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Definitions:

Plasma Cells

White blood cells that produce antibodies, deriving from B lymphocytes.

Ground Substance

The unstructured material that fills the space between cells in connective tissue, providing support and a medium for exchange.

Connective Tissues

A group of tissues in the body that maintain the form of the body and its organs and provide cohesion and internal support.

Stratified Columnar

Stratified columnar epithelium is a type of tissue composed of multiple layers of columnar cells, designed to protect or secrete substances in certain areas of the body.