AlphaBrona Industries manufactures 50,000 components per year.The manufacturing cost of the components was determined as follows:
An outside supplier has offered to sell the component for $10.Fixed costs will remain the same if the component is purchased from an outside supplier.
What is the effect on income if AlphaBrona Industries purchases the component from the outside supplier?
A) $290,000 decrease
B) $290,000 increase
C) $45,000 decrease
D) $45,000 increase

Question

AlphaBrona Industries manufactures 50,000 components per year.The manufacturing cost of the components was determined as follows: 
 An outside supplier has offered to sell the component for $10.Fixed costs will remain the same if the component is purchased from an outside supplier.
What is the effect on income if AlphaBrona Industries purchases the component from the outside supplier?
A) $290,000 decrease 
B) $290,000 increase 
C) $45,000 decrease 
D) $45,000 increase

Quizplus · Accepted Answer

Effect on income = $500,000 - $210,000 = $290,000 decrease
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AlphaBrona Industries Manufactures 50,000 Components Per Year