Reference no: EM132657619

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 60,000 parts is $160,000, which includes fixed costs of $50,000 and variable costs of $110,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs.

Problem 1: If Harvey Automobiles makes the part, how much will its operating income be?

A. $145,000 greater than if the company bought the part
B. $145,000 less than if the company bought the part
C. $55,000 greater than if the company bought the part
D. $55,000 less than if the company bought the part