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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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![Carver Company manufactures a component used in the production of one of its main products. The following cost information is available:
Direct materials
Direct labor (variable)
Variable manufacturing overhead
Fixed manufacturing overhead
$420
110
OA. Operating income would decrease by $70,000.
B. Operating income would increase by $20,000.
OC. Operating income would increase by $90,000.
OD. Operating income would decrease by $20,000.
90
30
A supplier has offered to sell the component to Carver for $650 per unit. If Carver buys the component from the supplier, the released facilities can
be used to manufacture a product that would generate a contribution margin of $20,000 annually. Assuming that Carver needs 3,000 components
annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources?](https://content.bartleby.com/qna-images/question/f267d921-7e78-4449-ada4-792e90b484ea/d806e343-d07b-44ff-bdb2-a69528cddf24/7g0dkoy_thumbnail.png)
Transcribed Image Text:Carver Company manufactures a component used in the production of one of its main products. The following cost information is available:
Direct materials
Direct labor (variable)
Variable manufacturing overhead
Fixed manufacturing overhead
$420
110
OA. Operating income would decrease by $70,000.
B. Operating income would increase by $20,000.
OC. Operating income would increase by $90,000.
OD. Operating income would decrease by $20,000.
90
30
A supplier has offered to sell the component to Carver for $650 per unit. If Carver buys the component from the supplier, the released facilities can
be used to manufacture a product that would generate a contribution margin of $20,000 annually. Assuming that Carver needs 3,000 components
annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources?
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