Component from the supplier instead of manufacturing

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Reference no: EM131205867

Bryon Industries manufactures 21,800 components per year. The manufacturing cost of the components was determined as follows:

Direct materials $ 118,000

Direct labor 178,000

Variable manufacturing overhead 69,000

Fixed manufacturing overhead 89,000

An outside supplier has offered to sell the component for $26.00. If Bryon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $19,000. If Bryon purchases the component from the supplier instead of manufacturing it, the effect on income would be:

a $251,800 increase.

a $182,800 decrease.

a $213,800 decrease.

a $548,400 increase.

Reference no: EM131205867

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