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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