Western Industries Manufactures 40,000 Components Per Year

Question 11
Multiple Choice

Western Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows: img An outside supplier has offered to sell the component for $12.75. Western Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier. What is the effect on income if Western purchases the component from the outside supplier? A) a $135,000 increase B) a $165,000 decrease C) a $195,000 increase D) a $225,000 decrease