Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows: An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year.
-If Talboe chooses to buy the wheel from the outside supplier,then the change in annual net operating income is a:
A)$5,000 decrease
B)$50,000 increase
C)$70,000 increase
D)$40,000 increase

Question

Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows:  An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year.
-If Talboe chooses to buy the wheel from the outside supplier,then the change in annual net operating income is a:
A)$5,000 decrease 
B)$50,000 increase 
C)$70,000 increase 
D)$40,000 increase

Quizplus · Accepted Answer

The Answer of Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows:  An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year.
-If Talboe chooses to buy the wheel from the outside supplier,then the change in annual net operating income is a:
A)$5,000 decrease 
B)$50,000 increase 
C)$70,000 increase 
D)$40,000 increase

Talboe Company Makes Wheels Which It Uses in the Production