Billings Company has the following costs when producing 100,000 units:
Variable costs $600,000
Fixed costs 900,000
An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000. The net increase (decrease) in the net income of accepting the supplier's offer is
a) $(15,000).
b) $285,000.
c) $315,000.
d) $840,000.
c) $315,000
You might also like to view...
Economic theories that a financial manager must ensure for efficient business operations, include ________
A) supply-and-demand analysis B) asset pricing theory C) Porter's theory of five forces D) Monte-Carlo simulation
All of the following are potential advantages of commercial paper EXCEPT
A) ability to borrow very large amounts. B) lower interest rates than comparable sources of short-term financing. C) no compensating balance requirements. D) flexible repayment terms.