Fornelli, Inc If Fornelli, Inc

Multiple Choice

Fornelli, Inc.can produce 100 units of a component part with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 15,000 \\\text { Direct Labor } & 6,500 \\\text { Variable Overhead } & 16,000 \\\text { Fixed Overhead } & 11,000\end{array}$$ If Fornelli, Inc.can purchase the units externally for $40,000, by what amount will its total costs change?

A) An increase of $40,000
B) An increase of $2,500
C) An increase of $8,500
D) A decrease of $11,000