Harvey Automobiles Uses a Standard Part in the Manufacture of Several

question 232

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 90,000 parts is $130,000, which includes fixed costs of $70,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.50 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $350,000 profit. If Harvey Automobiles makes the part, what will its operating income be?

• A)$63,000 greater than if the company bought the part
• B)$220,000 less than if the company bought the part
• C)$220,000 greater than if the company bought the part
• D)$350,000 greater than if the company bought the part

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Definitions:

British Rule

The period of colonial domination by Great Britain over various territories across the world, characterized by economic exploitation and cultural imposition, lasting until the mid-20th century.

Benjamin Franklin

A Founding Father of the United States, renowned for his contributions as an inventor, writer, politician, and diplomat.

Stono Rebellion

A 1739 slave uprising in the colony of South Carolina, one of the largest and most violent slave insurrections in the British mainland colonies.

Native Americans

Indigenous peoples of the United States, including both the mainland and Alaska, with diverse cultures, languages, and histories.