Voltaic Electronics Uses a Standard Part in the Manufacture of Different

question 163

Multiple Choice

Voltaic Electronics uses a standard part in the manufacture of different types of radios.The total cost of producing 36,000 parts is $110,000,which includes fixed costs of $50,000 and variable costs of $60,000.The company can buy the part from an outside supplier for $1 per unit and avoid 30% of the fixed costs.Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000.If Voltaic outsources,what will be the effect on operating income?

• A)increase of $55,000
• B)decrease of $55,000
• C)decrease of $15,000
• D)increase of $16,000

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Definitions:

Production Facility

A location, such as a factory or workshop, where goods are manufactured or assembled.

Unit Product Costs

The total cost (fixed and variable) divided by the number of units produced, representing the cost per each unit manufactured.

Grinding Machine Time

The amount of time a grinding machine is used in the manufacturing process, often a basis for allocating production costs.

Intermediate Calculations

The steps or computations performed as part of a larger problem-solving process, often leading towards final results or conclusions.