Part P40 is a part used in the production of air conditioners at Jackson Corpora

Question

Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40 Number of parts produced annually Fixed costs Variable costs Total cost to produce 24,000 $45,000 $66,000 $111,000 Jackson Corporation can purchase the part from an outside supplier for $4.75 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. If Jackson Corporation makes the part, how much will its operating income be? O A. O B. O C. O D. $22,500 greater than if the company bought the part $25,500 greater than if the company bought the part $136,500 greater than if the company bought the part $70,500 greater than if the company bought the part

Explanation / Answer

Make Buy Fixed costs 45000 22500 Variable costs 66000 Purchase from outside supplier 114000 Total costs 111000 136500 $25500(136500-111000) greater than if the company bought the part Option B is correct

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