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zhannawk [14.2K]
3 years ago
15

XYZ Company makes 400 widgets. The variable costs are $35.60 per unit and fixed costs are $30.00 per unit; however, $21.40 in fi

xed costs per unit is unavoidable. What is the effect on net income if the company instead buys the widgets from an outside supplier for $44.00 per unit?
Business
1 answer:
Anuta_ua [19.1K]3 years ago
3 0

Answer:

increase in income  of $80

Explanation:

Prepare an Analysis of Costs and Savings if the Company buys from Outside Supplier.

Note : The  fixed costs per unit at are unavoidable are irrelevant and disregarded in this decision.

<u>Analysis of Costs and Savings</u>

Purchase Price (400 widgets × $44.00)  =    ($17,600)

Savings :

Variable Costs ($35.60 × 400 widgets)   =     $14,240

Fixed Cost ( $8.60 × 400 widgets)           =      $3,440

Net Income effect                                      =           $80

Conclusion :

The effect on net income if the company instead buys the widgets is an increase in  income  of $80

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