A supplier has offered to sell the component to Carver for per unit. If Carver buys the component from the supplier, the released facilities can be used to manufacture a product that would generate a contribution margin of annually. Assuming that Carver needs components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources?

A. Operating income would decrease by $100,000

Explanation:

The computation of the impact on operating income if Carver outsources is shown below:-

Particulars                    Per unit             3,000 units

                                Make     Buy       Make          Buy

Direct material         410                  1,230,000  

Direct labor              110                   330,000  

Variable manufacturing

overhead                  90                  270,000  

Opportunity cost                              20,000

Purchase cost                      650                          1,950,000

Total cost                                       1,850,000      1,950,000

Operating income would decrease

= $1,950,000 - $1,850,000

= $10,000

answer; be sure that the information on file is correct;

answer; someone must cover the cost associated with the provision of scarce goods in both sectors;