Bonita Industries produces 5000 units of part A12E. The following costs were incurred for that level of production: Direct materials $ 60000 Direct labor 165000 Variable overhead 80000 Fixed overhead 175000 If Bonita buys the part from an outside supplier, $45000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $73, net income will increase (decrease) by $145000. $(60000).$85000. $(15000).

($15,000)

Explanation:

The computation of net income will increase (decrease) is given below:-

First we need to find out the relevant cost per unit which is shown below:-

Total relevant cost = Direct material + Direct labor + Variable overhead + Fixed overhead

= $60,000 + $165,000 + $80,000 + $45,000

= $350,000

Relevant cost per unit = Total relevant cost ÷ Number of units to be produced

= $350,000 ÷ 5,000

= $70

Price of supplier per unit = $73

Net increase in cost per unit = ($73 - $70) $2

Number of units to be produced = 5,000

Decrease in net income = Number of units to be produced × Net increase in cost per unit

= 5,000 × $2

=  $15,000

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