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: 27,000 Number of parts produced annually Fixed costs Variable costs Total cost to produce $70,000 $114,000 Jackson Corporation can purchase the part from an outside supplier for $4.70 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? OA. $78,900 greater than if the company bought the part O B. $34,900 greater than if the company bought the part O C. $22,000 greater than if the company bought the part O D. $148,900 greater than if the company bought the part

Explanation / Answer

Differential analysis :

so answer is b) $34900 greater than if the company bought the part

Make Buy Variable cost 70000 Fixed cost 22000 Purchase cost 126900 Total 92000 126900

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