Figure 13-7

Multiple Choice

Figure 13-7. 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:
Refer to Figure 13-7.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.