Value Electronics Uses a Standard Part in the Manufacture of Different

question 39

Multiple Choice

Value Electronics uses a standard part in the manufacture of different types of radios.The total cost of producing 28,000 parts is $90,000,which includes fixed costs of $30,000 and variable costs of $60,000.The company can buy this part from an external supplier for $5 per unit and avoid 10% of the fixed costs.If Value Electronics decides to outsource the production of the part,how will it impact its operating income?

• A)Operating income increases by $77,000.
• B)Operating income decreases by $77,000.
• C)Operating income increases by $80,000.
• D)Operating income decreases by $80,000.

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Definitions:

Natural Disaster

A sudden and devastating event in nature, such as a hurricane, flood, or earthquake, that causes significant damage or loss.

Energy Conservation

The practice of reducing the use of energy through more efficient systems, processes, or behaviors to preserve resources.

Small Businesses

Enterprises or firms that maintain a small number of employees, have comparatively lower volume of sales, and are usually independently owned and operated.

Founders

Individuals who establish an organization or company, often bringing an innovative idea into existence.