Voltaic Electronics Uses a Standard Part in the Manufacture of Different

question 177

Multiple Choice

Voltaic Electronics uses a standard part in the manufacture of different types of radios.The total cost of producing 35,000 parts is $105,000,which includes fixed costs of $50,000 and variable costs of $55,000.The company can buy the part from an outside supplier for $2 per unit and avoid 20% 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 $11,000
• B) decrease of $11,000
• C) decrease of $10,000
• D) increase of $16,000

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Definitions:

Zero Coupon Bond

A type of bond that does not pay periodic interest payments and is issued at a significant discount from its face value.

Interest Rates

The cost of borrowing money or the return on invested funds, expressed as a percentage of the principal.

Percentage Increase

A metric used to calculate the rise in value or quantity of an item over a period, expressed as a fraction of its initial value.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, encompassing both interest payments and the gain or loss if the bond was purchased at a discount or premium.