Carver Company manufactures a component used in the production of one of its main products. The following c information is available: Direct materials $410.00 Direct labor (variable) 100 Variable manufacturing overhead Fixed manufacturing overhead A supplier has offered to sell the component to Carver for $640.00 per unit. If Carver buys the component from tl supplier, the released facilities can be used to manufacture a product that would generate a contribution margin $20,000.00 annually. Assuming that Carver needs 4,000 components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources? 80 30 O A. Operating income would decrease by $180,000.00. B. Operating income would increase by $200,000.00. O C. Operating income would increase by $20,000.00. D. Operating income would decrease by $20,000.00.

Carver Company manufactures a component used in the production of one of its main products. The following c information is available: Direct materials $410.00 Direct labor (variable) 100 Variable manufacturing overhead Fixed manufacturing overhead A supplier has offered to sell the component to Carver for $640.00 per unit. If Carver buys the component from tl supplier, the released facilities can be used to manufacture a product that would generate a contribution margin $20,000.00 annually. Assuming that Carver needs 4,000 components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources? 80 30 O A. Operating income would decrease by $180,000.00. B. Operating income would increase by $200,000.00. O C. Operating income would increase by $20,000.00. D. Operating income would decrease by $20,000.00.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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