Ring Company Makes Telephones

Ring Company makes telephones.Currently, Ring makes all components of the telephones in-house.An outside company has offered to supply one component, part number X76, for $12 each.Ring uses 22,000 of these components per year.Costs of X76 are as follows:​ ​
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Suppose that 30% of the fixed overhead is avoidable if part X76 is not made by Ring.Should Ring purchase the part from the outside supplier?

A) No, income will decrease by $71,500.
B) No, income will decrease by $15,000.
C) Yes, income will increase by $74,500.
D) No, income will decrease by $10,500.
E) Yes, income will increase by $10,500.

Correct Answer:

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