Managerial Accounting
Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Office Expert Inc. produces a component which is required for manufacturing many of its appliances. The monthly production data for the component are as follows:

Monthly Production Data for Component
Production Data Amounts
Number of units produced 2,500 units
Variable costs per unit $10 per unit
Total monthly fixed costs (allocated) $18,000

The company received an offer from a foreign supplier to purchase the component for $15 per unit. The monthly fixed costs are unavoidable. However, if Office Expert decides to purchase the component, they can use the freed manufacturing space to earn an additional revenue of $20,000 per month.

If Office Expert decides to purchase from the foreign supplier, monthly operating income would –

Group of answer choices
Decrease by $24,000
Increase by $7,500
Increase by $25,500
Decrease by $12,500
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    Managerial Accounting
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Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub