Cherry Company Makes Telephones

Multiple Choice

Cherry Company makes telephones.Currently, Cherry makes all the components of the telephones in-house.An outside company has offered to supply one component, part number X76, for $15 each.Cherry uses 15,000 of these components per year.Costs of X76 are as follows:
Assume that all of the fixed overhead is allocated and cannot be avoided.Should Cherry purchase the part from the outside supplier?

A) Yes, income will increase by $200,500.
B) No, income will decrease by $145,500.
C) Yes, income will increase by $278,500.
D) No, income will decrease by $120,000.
E) Yes, income will increase by $140,200.