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 50,000 parts is $150,000, which includes fixed costs of $50,000 and variable costs of $100,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $15,000 profit. If Harvey Automobiles makes the part, what will its operating income be? ( A. $170,000 greater than if the company bought the part 0 B. $50,000 greater than if the company bought the part ( C. $20,000 greater than if the company bought the part 0 D. $20,000 less than if the company bought the part

Explanation / Answer

Correct Option is C) $20000 greater than if the company bought the part

Correct Option is D) $47200

Calculation of Change in Operating Income Produce Buy Effect on Profit Variable Costs / Cost of Buying 100000 50000*3 150000 -50000 Fixed Costs 50000 50000*70% 35000 15000 Profit from product manufactured in freed space 15000 15000 Change in Operating Income -20000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

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