Figure 9-2
Vest Industries Manufactures 40,000 Components Per Year An Outside Supplier Has Offered to Sell the Component for Manufacturing

Multiple Choice

Figure 9-2
Vest Industries manufactures 40,000 components per year. The manufacturing cost of the components was determined as follows: $\begin{array}{lr}\text { Direct materials } & £ 75,000 \\\text { Direct labour } & 120,000 \\\text { Variable manufacturing overhead } & 45,000 \\\text { Fixed manufacturing overhead } & 60,000 \\\text { Total } & £ 300,000\end{array}$ An outside supplier has offered to sell the component for £12.75.
-Refer to Figure 9-2. What is the effect on income if Vest purchases the component from the outside supplier?

A) £225,000 increase
B) £195,000 increase
C) £165,000 decrease
D) £135,000 increase