Valuable Electronics Uses a Standard Part in the Manufacture of Different

question 128

Multiple Choice

Valuable Electronics uses a standard part in the manufacture of different types of radios.The total cost of producing 29,000 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 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 Valuable outsources,what will be the effect on operating income?

• A) increase of $28,000
• B) decrease of $28,000
• C) decrease of $15,000
• D) increase of $16,000

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Definitions:

Motivated

Being driven or encouraged to act towards achieving personal goals or completing tasks.

Recognition

The action or process of acknowledging someone's achievements, status, or rights.

Tolerance

Tolerance is the willingness to accept and permit beliefs or behaviors that one might disagree with, without imposing one's own views.

Risk Taking

The act of undertaking actions that involve uncertainty or potential loss, with the expectation of achieving gain or growth.