Blue Ridge Bicycles Uses a Standard Part in the Manufacture

Multiple Choice

Blue Ridge Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 43,000 parts is $140,000, which includes fixed costs of $68,000 and variable costs of $72,000. The company can buy the part from an outside supplier for $3.80 per unit, and avoid 30% of the fixed costs. If Blue Ridge Bicycles makes the part, how much will its operating income be?

A) $88,400 less than if the company bought the part
B) $71,000 less than if the company bought the part
C) $88,400 greater than if the company bought the part
D) $71,000 greater than if the company bought the part