Seven Seas Sailboats Company Manufactures 100 Luxury Yachts Per Month

Seven Seas Sailboats Company manufactures 100 luxury yachts per month.Included in each yacht is a compact media center.Seven Seas Sailboats manufactures the media center in-house.The company is considering the possibility of outsourcing the production of media centers in order to close down some of its facilities and reduce the administrative costs.At present,the variable cost per unit is $275 and fixed costs are $39,000 per month.Assume that if they outsource,fixed costs could be reduced by 40%.The production manager advised the company to contract with a foreign supplier who offered a contract rate of $420 per unit.If they outsource the media center,how would that affect operating income?

A) Operating income would improve by $1,100.
B) Operating income would improve by $4,000.
C) Operating income would decline by $14,500.
D) Operating income would remain the same.