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7 years ago
Mulcahey Automobiles Company fabricates automobiles. Each vehicle includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:

Volume   800     units per month
Variable cost per unit   $7     per unit
Fixed costs   $12,000     per month

An Indonesian factory has offered to supply Mulcahey with ready-made units for a cost of $15 per wiring harness. Assume that Mulcahey's fixed costs could be reduced by $4,000 if it outsources and that Mulcahey will not be able to use the excess capacity in any profitable manner.  If Mulcahey decides to outsource, monthly operating income will ________. 
A) decrease by $2,400
B) increase by $12,000
C) decrease by $12,000
D) increase by $5,600
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
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TanksTanks
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Deprecated Author
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#2
7 years ago
Makes perfect sense, thx
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