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An outside supplier has offered to provide Maxter Corp with the 10,000 subcomponents at a $65 per unit price. If Maxter Corp accepts the outside offer, what will be the effect on short-term profits? Group of answer choices $200,000 increase $150,000 decrease No change $50,000 increase

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Cricetus

Answer:

Option b ($150,000 decrease) is the correct answer.

Explanation:

Given:

Fixed manufacturing overhead,

= $65

Units,

= 10,000

According to the question,

Current cost is:

= [tex]70\times 10,000[/tex]

= [tex]700,000[/tex] ($)

The expected cost will be:

= [tex]Fixed \ manufacturing \ overhead+(Units\times Purchase \ price)[/tex]

By substituting the values, we get

= [tex](65\times 10000)+200000[/tex]

= [tex]650000+200000[/tex]

= [tex]850000[/tex]

then,

= [tex]850000-700000[/tex]

= [tex]150000[/tex] ($)

Thus the above is the right answer.

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