Anderson Co.makes and uses 5,000 components each year in its manufacturing operations.An outside supplier has offered to supply the components to Anderson at $66 per unit.Anderson's production costs are as follows: If Anderson accepts the order,$8 of fixed overhead per unit will be eliminated.
If the offer is accepted,operating income will
A)increase by $100,000.
B)decrease by $70,000.
C)decrease by $30,000.
D)increase by $60,000.

Question

Anderson Co.makes and uses 5,000 components each year in its manufacturing operations.An outside supplier has offered to supply the components to Anderson at $66 per unit.Anderson's production costs are as follows:  If Anderson accepts the order,$8 of fixed overhead per unit will be eliminated.
If the offer is accepted,operating income will
A)increase by $100,000. 
B)decrease by $70,000. 
C)decrease by $30,000. 
D)increase by $60,000.

Quizplus · Accepted Answer

The Answer of Anderson Co.makes and uses 5,000 components each year in its manufacturing operations.An outside supplier has offered to supply the components to Anderson at $66 per unit.Anderson's production costs are as follows:  If Anderson accepts the order,$8 of fixed overhead per unit will be eliminated.
If the offer is accepted,operating income will
A)increase by $100,000. 
B)decrease by $70,000. 
C)decrease by $30,000. 
D)increase by $60,000.