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Priestly 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   700    units per month
Variable cost per unit   $7    per unit
Fixed costs   $16,000    per month

An Indonesian factory has offered to supply Priestly with ready-made units for a price of $14 per wiring harness. Assume that Priestly's fixed costs are unavoidable, but that Priestly could use the vacated production facilities to earn an additional $9,500 of profit per month. If Priestly decides to outsource, monthly operating income will ________.
A) increase by $4,600
B) increase by $9,500
C) decrease by $16,000
D) decrease by $24,200
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
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