[The following information applies to the questions displayed below.]
Perry's Cycle Company manufactures annually 20,000 units of TushSeat,a bicycle seat used on many of the company's products,and also sold directly to retailers for $38 per unit.At the current level of production,the cost per unit to produce TushSeat consists of:
It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers.
-Assume that seats can be purchased from the outside supplier at $25 each,and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy.Buying the seats instead of manufacturing them would cause Perry's operating income to:
A)Decrease by $20,000.
B)Increase by $36,000.
C)Increase by $16,000.
D)Decrease by $24,000.

Question

[The following information applies to the questions displayed below.]
Perry's Cycle Company manufactures annually 20,000 units of TushSeat,a bicycle seat used on many of the company's products,and also sold directly to retailers for $38 per unit.At the current level of production,the cost per unit to produce TushSeat consists of:
  It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers.
-Assume that seats can be purchased from the outside supplier at $25 each,and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy.Buying the seats instead of manufacturing them would cause Perry's operating income to:
A)Decrease by $20,000. 
B)Increase by $36,000. 
C)Increase by $16,000. 
D)Decrease by $24,000.

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The Answer of [The following information applies to the questions displayed below.]
Perry's Cycle Company manufactures annually 20,000 units of TushSeat,a bicycle seat used on many of the company's products,and also sold directly to retailers for $38 per unit.At the current level of production,the cost per unit to produce TushSeat consists of:
  It has come to the attention of management that a seat of similar quality can be purchased from outside suppliers.
-Assume that seats can be purchased from the outside supplier at $25 each,and that 60% of total fixed costs incurred in producing TushSeat will be eliminated by this strategy.Buying the seats instead of manufacturing them would cause Perry's operating income to:
A)Decrease by $20,000. 
B)Increase by $36,000. 
C)Increase by $16,000. 
D)Decrease by $24,000.

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