Peluso Company, a Manufacturer of Snowmobiles, Is Operating at 70

Multiple Choice

Peluso Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Peluso's plant manager is considering making the headlights now being purchased from outside supplier for £11.00 each. The Peluso plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headlight requires £4.00 of direct materials, £3.00 of direct labour, and £6.00 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Peluso Company to manufacture the headlights should result in a net gain (loss) for each headlight of

A) £(2.00) .
B) £1.60.
C) £0.40.
D) £2.80.