Spikes Company manufactures 5,000 high-end racing bicycles each period.Spikes has been making all the components for the bikes, but a supplier has approached Spikes with an offer to sell her bicycle seats at a price of $40.The cost per unit of manufacturing one bicycle seat is computed as follows: $$\begin{array} { l r }
\text { Direct Material } & \$ 10 \
\text { Direct Labor } & \$ 18 \
\begin{array} { l }
\text { Manufacturing overhead } \
( 100 \% \text { fixed) }
\end{array} & \$ 10
\end{array}$$ If the bicycle seats are purchased from the outside supplier, $1 per unit of the fixed manufacturing overhead costs can be avoided.If Spikes purchases the seats, the facility used to manufacture the seats would be rented for $20,000 per period.If Spikes chooses to purchase the bicycle seats, then the change in annual net operating income is an:

Question

Spikes Company manufactures 5,000 high-end racing bicycles each period.Spikes has been making all the components for the bikes, but a supplier has approached Spikes with an offer to sell her bicycle seats at a price of $40.The cost per unit of manufacturing one bicycle seat is computed as follows: $$\begin{array} { l r } 
\text { Direct Material } & \$ 10 \
\text { Direct Labor } & \$ 18 \
\begin{array} { l } 
\text { Manufacturing overhead } \
( 100 \% \text { fixed) }
\end{array} & \$ 10
\end{array}$$ If the bicycle seats are purchased from the outside supplier, $1 per unit of the fixed manufacturing overhead costs can be avoided.If Spikes purchases the seats, the facility used to manufacture the seats would be rented for $20,000 per period.If Spikes chooses to purchase the bicycle seats, then the change in annual net operating income is an:

Quizplus · Accepted Answer

The Answer of Spikes Company manufactures 5,000 high-end racing bicycles each period.Spikes has been making all the components for the bikes, but a supplier has approached Spikes with an offer to sell her bicycle seats at a price of $40.The cost per unit of manufacturing one bicycle seat is computed as follows: $$\begin{array} { l r } 
\text { Direct Material } & \$ 10 \
\text { Direct Labor } & \$ 18 \
\begin{array} { l } 
\text { Manufacturing overhead } \
( 100 \% \text { fixed) }
\end{array} & \$ 10
\end{array}$$ If the bicycle seats are purchased from the outside supplier, $1 per unit of the fixed manufacturing overhead costs can be avoided.If Spikes purchases the seats, the facility used to manufacture the seats would be rented for $20,000 per period.If Spikes chooses to purchase the bicycle seats, then the change in annual net operating income is an:

Spikes Company Manufactures 5,000 High-End Racing Bicycles Each Period If the Bicycle Seats Are Purchased from the Outside Supplier