Ring company makes telephones. currently, ring makes all components of the telephones in-house. an outside company has offered to supply one component, part number x76, for $12 each. ring uses 22,000 of these components per year. costs of x76 are as follows: direct materials $3.00 direct labor $1.50 variable overhead $2.75 fixed overhead $5.00 suppose that 30% of the fixed overhead is avoidable if part x76 is not made by ring. should ring purchase the part from the outside supplier? a. yes, income will increase by $10,500. b. yes, income will increase by $74,500. c. no, income will decrease by $15,000. d. no, income will decrease by $71,500.

The correct answer is D.

Explanation:

Giving the following information:

An outside company has offered to supply one component, part number X76, for $12 each. Ring uses 22,000 of these components per year. Costs of X76 are as follows: Direct materials $3.00 Direct labor $1.50 Variable overhead $2.75 Fixed overhead $5.00 Suppose that 30% of the fixed overhead is avoidable if part X76 is not made by Ring.

Buy= 12*22,000= 264,000

Fixed overhead= (5*0.70)*22,000= 77,000

Total= $341,000

Make in-house:

Direct material= 3

Direct labor $1.50

Variable overhead $2.75

Fixed overhead $5.00

Total unitary cost= 12.25

Total cost= 12.25*22,000= $269,500

answer: e

explanation: