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ololo11 [35]
3 years ago
11

A company produces 500 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactu

res the circuits in-house but is considering outsourcing the circuits at a contract cost of $28 each. Currently, the cost of producing circuit in-house includes variable cost of $26 per circuit and fixed cost of $5,000 perr month. Assume the fixed cost are unavoidable but thhat company could employ the vacated premises to earn rental income of $2,200 per month. If the companny outsources, monthly operating income will be ________________(Show work)
A) increase by $1,200
B) decrease by $14,000
C) decrease by $1,000
D) increase by $27,000
Business
1 answer:
VladimirAG [237]3 years ago
4 0

Answer:

A) increase by $1,200 is the correct option

Explanation:

Incremental savings     [500 *26] =13000

Rental income=2,200

Total income=15200

Less:Incremental cost  =[500*28] =- 14000

Incremental income 1200

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• may be required to incur high costs for abandoning old technologies in an effort to keep pace with suppliers.

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Explanation:

You didn't provide the options but I searched online and got the options from which the correct answers were chosen.

Vertical integration occurs when the suppliers or retailers is being controlled or owned by a company and hence, control its supply chain. This brings about reduction in costs and the improvement in efficiencies.

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• may be required to incur high costs for abandoning old technologies in an effort to keep pace with suppliers.

• may need to continue producing suboptimal products rather than upgrading its technology

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