Homework Answers
Total cost to make = (1,300 X $12.50) + $10,000 = $26,250
Total cost to outsource = (1,300 X $17) + $10,000 = $32,100
Cost to outsource is more than cost to make. Operating income will reduce if outsourced.
Difference = $32,100 - $26,250 = $5,850
Operating Income will reduce by $5,850
Option A
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