Jo Company makes and sells widgets using a component part presently produced in-house. 10,000 of the parts are needed each year, at a cost of $400,000, which includes allocated fixed costs of $100,000.
A reputable outside vendor has offered to sell the parts to Jo for $32 per unit.
What will be the effect (increase or decrease and amount) on Jo's operating income if the offer is accepted ?
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Jo Company makes and sells widgets using a component part presently produced ...
The problem deals with determining whether to buy or make an item.