Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation makes the part,how much will its operating income be?

Question

Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation makes the part,how much will its operating income be?

Quizplus · Accepted Answer

C)
Purchase cost 22,000 × $4.25 = $93,500
Plus unavoidable fixed cost 40,000 × 50% 20,000
Total Cost to purchase 113,500
Less Cost to build 106,000
Add'l cost to buy the part 7,500

Part P40 Is a Part Used in the Production of Air