Answer:
Operating income will be $6,000
Explanation:
The computation of the operating income is shown below:
= Total cost - outsourcing cost
where,
Total cost = Variable cost + fixed cost
Variable cost = Number of microwaves × variable cost per unit
= 500 × $26
= $13,000
And, the fixed cost is $7,000
Now put these values to the above formula
So, the value would equal to
= $13,000 + $7,000
= $20,000
And, the outsourcing cost equal to
= Number of microwaves × outsourcing cost per unit
= 500 × $28
= $14,000
So, the net income would be
= $20,000 - $14,000
= $6,000
