Answer:
Option C
Explanation:
There will be 15,000 increase in net income for purchasing the handles from outside supplier as it saves us a cost of 15,000
Cost of manufacturing 60,000 handles = $150,000
If the company purchases it from outside = 2.25 per handle x 60,000 handles = $135,000
fixed factory overheads of $ 25,000 will be still there as additional cost
Additional rental income = 25,000
Outsourcing handles = cost to purchase + fixed factory overhead - rental income
Outsourcing handles = 135,000 + 25,000 - 25,000
Outsourcing handles = 135,000
Net Income effect = Cost of manufacturing - Cost to outsouce
Net income effect = 150,000 - 135,000
Net income effect = 15,000 increase
