Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: An outside supplier has offered to sell the component for $12.75.Fixed cost will remain the same if the component is purchased from an outside supplier.
Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Vest purchases the component from the outside supplier?
A)$225,000 decrease
B)$195,000 increase
C)$165,000 decrease
D)$135,000 increase

Question

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows:  An outside supplier has offered to sell the component for $12.75.Fixed cost will remain the same if the component is purchased from an outside supplier.
Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Vest purchases the component from the outside supplier?
A)$225,000 decrease 
B)$195,000 increase 
C)$165,000 decrease 
D)$135,000 increase

Quizplus · Accepted Answer

The Answer of Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows:  An outside supplier has offered to sell the component for $12.75.Fixed cost will remain the same if the component is purchased from an outside supplier.
Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Vest purchases the component from the outside supplier?
A)$225,000 decrease 
B)$195,000 increase 
C)$165,000 decrease 
D)$135,000 increase

Vest Industries Manufactures 40,000 Components Per Year