Cuyahoga Valley Bicycles Uses a Standard Part in the Manufacture

Multiple Choice

Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes.The cost of producing 40,000 parts is $138,000,which includes fixed costs of $68,000 and variable costs of $70,000.The company can buy the part from an outside supplier for $3.50 per unit,and avoid 30% of the fixed costs.
Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit.If Cuyahoga Valley Bicycles makes the part,what will its operating income be?

A) $37,600 greater than if the company bought the part
B) $37,600 less than if the company bought the part
C) $61,600 greater than if the company bought the part
D) $175,600 greater than if the company bought the part