Question

Capple Industries manufactures and sells 15,000 components per year as one part of its production activities. The annual costs to manufacture the part are as follows: Direct materials $150,000 Direct labor $240,000 Variable manufacturing overhead $100,000 Fixed manufacturing overhead $110,000 (allocated facility-level or common costs) Total $600,000 If the component is purchased, a part of the manufacturing facility can be rented to another business for $7,000 per year. An outside supplier has offered to sell the component to Galaxy for $35 each. If Capple purchases the component instead of manufacturing it, the effect on Capple's annual net income would be a(n): $75,000 increase $35,000 decrease $28,000 decrease $82,000 increase

          Capple Industries manufactures and sells 15,000 components per year as one part of its
production activities.
The annual costs to manufacture the part are as follows:
Direct materials
$150,000
Direct labor
$240,000
Variable manufacturing overhead
$100,000
Fixed manufacturing overhead
$110,000
(allocated facility-level or common costs)
Total
$600,000
If the component is purchased, a part of the manufacturing facility can be rented to another
business for $7,000 per year.
An outside supplier has offered to sell the component to Galaxy for $35 each. If Capple
purchases the component instead of manufacturing it, the effect on Capple's annual net
income would be a(n):
$75,000 increase
$35,000 decrease
$28,000 decrease
$82,000 increase

Capple Industries manufactures and sells 15,000 components per year as one part of its
production activities.
The annual costs to manufacture the part are as follows:
Direct materials
150,000
Direct labor240,000
Variable manufacturing overhead
100,000
Fixed manufacturing overhead110,000
(allocated facility-level or common costs)
Total
600,000
If the component is purchased, a part of the manufacturing facility can be rented to another
business for7,000 per year.
An outside supplier has offered to sell the component to Galaxy for 35 each. If Capple
purchases the component instead of manufacturing it, the effect on Capple's annual net
income would be a(n):75,000 increase
35,000 decrease28,000 decrease
82,000 increase

Added by James M.

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