Use the information below to answer the following question(s):
Part Z45 is a part used in the production of blenders at Andrew Corporation. The following costs and data relate to the production of Part Z45:

Andrew Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 40% of the fixed costs would be avoided.
-If Andrew Corporation purchases the part, how much will its operating income be?

Question

Use the information below to answer the following question(s):
Part Z45 is a part used in the production of blenders at Andrew Corporation. The following costs and data relate to the production of Part Z45:
  
Andrew Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 40% of the fixed costs would be avoided.
-If Andrew Corporation purchases the part, how much will its operating income be?

Quizplus · Accepted Answer

Purchasing the part instead of making it would result in a $3,000 decrease in operating income compared to making the part in-house. This is determined by comparing the costs associated with each option and identifying the difference.

Use the Information Below to Answer the Following Question(s)