Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials $8400 Direct Labor       $11,250 Variable overhead  $12,600 Fixed overhead   $16,200 An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit. If Clemente accepts the offer, by how much will net income increase (decrease)?     $3,750   $19,950   $(8,850)   $(2,850)

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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 $420 Direct labor (variable) 110 Variable manufacturing overhead Fixed manufacturing overhead 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? A. Operating income would decrease by $70,000. B. Operating income would increase by $20,000. C. Operating income would decrease by $20,000. O D. Operating income would increase by $90,000.

Chip Jones ahoy manufactures the cloth for sails. The company has the capacity to produce 36,000 sails per year and is currently producing and selling 25,000 sails per year. The following information relates to current production: $175 Sales price per unit Variable costs per unit: Manufacturing Selling and administrative Total fixed costs: Manufacturing Selling and administrative LEFE $62 $20 $700,000 $250,000 Assume that a special pricing order is accepted for 5600 sails at a sales price of $150 per unit. This special order requires both variable manufacturing and variable selling and administrative costs, as well as incremental fixed costs of $400,000. What will be the impact on operating income? Operating income decreases by $380,800.