Dong Fang Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each.
Assume that Dong Fang's fixed costs could be reduced by $5,000 if they outsource, and that Dong Fang will not be able to use the excess capacity in any profitable manner. If Dong Fang decides to outsource, what will be the impact on Dong Fang's monthly operational income?

Question

Dong Fang Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:

Dong Fang Company fabricates inexpensive automobiles for sale to 3<sup>rd</sup> world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each. Assume that Dong Fang's fixed costs could be reduced by $5,000 if they outsource, and that Dong Fang will not be able to use the excess capacity in any profitable manner. If Dong Fang decides to outsource, what will be the impact on Dong Fang's monthly operational income? A) It will go up by $2,600. B) It will go down by $14,000. C) It will go up by $8,600. D) It will go down by $400.

A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each.
Assume that Dong Fang's fixed costs could be reduced by $5,000 if they outsource, and that Dong Fang will not be able to use the excess capacity in any profitable manner. If Dong Fang decides to outsource, what will be the impact on Dong Fang's monthly operational income?

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The Answer of Dong Fang Company fabricates inexpensive automobiles for sale to 3^rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: A factory in Indonesia has offered to supply Dong Fang with ready-made units for a price of $14.00 each. Assume that Dong Fang's fixed costs could be reduced by $5,000 if they outsource, and that Dong Fang will not be able to use the excess capacity in any profitable manner. If Dong Fang decides to outsource, what will be the impact on Dong Fang's monthly operational income?

Dong Fang Company Fabricates Inexpensive Automobiles for Sale to 3rd

Dong Fang Company Fabricates Inexpensive Automobiles for Sale to 3^rd