Question

please answer

Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40: Number of parts produced annually 22,000 Fixed costs $40,000 Variable costs $66,000 Total cost to produce $106,000 Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. What would be the impact on operating income if this change were made? Should Jackson Corporation make the change?

Answer 1

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