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:

Decision Rights

The duties that a particular individual in an organization is expected to perform.

Performance Evaluation

This involves assessing an employee's job performance using various criteria to determine the effectiveness and efficiency of their work.

Centralized Firms

Organizations that maintain decision-making authority at a central point, typically at the headquarters or the top management team.

Variable Costs

Expenses that fluctuate in direct proportion to changes in the level of production or service activity.