Vest Industries Manufactures 40,000 Components Per Year

Multiple Choice

Vest Industries manufactures 40,000 components per year.The manufacturing cost of the components was determined as follows:

An outside supplier has offered to sell the component for $12.75.Fixed cost will remain the same if the component is purchased from an outside supplier.
Vest Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier.
What is the effect on income if Vest purchases the component from the outside supplier?

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