Chetek Industries Manufactures 15,000 Components Per Year

Multiple Choice

Chetek Industries manufactures 15,000 components per year.The manufacturing cost of the components was determined to be as follows: Assume Chetek Industries could avoid $40,000 of fixed manufacturing overhead if it purchases the component from an outside supplier.An outside supplier has offered to sell the component for $34.If Chetek purchases the component from the supplier instead of manufacturing it,the effect on income would be a

A) $60,000 increase
B) $10,000 increase
C) $100,000 decrease
D) $140,000 increase