Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit and avoid 30% of the fixed costs. If Harvey Automobiles makes the part, how much will its operating income be? Select one: a. $42,000 greater than if the company bought the part. b. $42,000 less than if the company bought the part. c. $78,000 greater than if the company bought the part. d. $78,000 less than if the company bought the part.

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit and avoid 30% of the fixed costs. If Harvey Automobiles makes the part, how much will its operating income be? Select one: a. $42,000 greater than if the company bought the part. b. $42,000 less than if the company bought the part. c. $78,000 greater than if the company bought the part. d. $78,000 less than if the company bought the part.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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