Harvey Automobiles uses a standard part in the manufacture of several of its tru

Question

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 80,000 parts is $170,000, which includes fixed costs of $40,000 and variable costs of $130,000. The company can buy the part from an outside supplier for $3.30 per unit, and avoid 30% of the fixed costs. If Harvey Automobiles makes the part, how much will its operating income be? O A. $122,000 greater than if the company bought the part 0 B. $122,000 less than if the company bought the part O C. $236,000 less than if the company bought the part 0 D. $236,000 greater than if the company bought the part

Explanation / Answer

Decision making :

If Harvey automobiles makes the part, operating income be

so answer is a) $122000 greater than if the company bought the part

Make Buy Variable cost 130000 Fixed cost (40000*30%) 12000 Purchase cost (80000*3.30) 264000 Total 142000 264000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.