Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs.

If Harvey Automobiles makes the part, how much will its operating income be?

Select one:

a. $42,000 greater than if the company bought the part

b. $42,000 less than if the company bought the part

c. $78,000 greater than if the company bought the part

d. $78,000 less than if the company bought the part

The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit and avoid 30% of the fixed costs.

Make in-house= 120,000

Buy= 3*40,000 + (60,000*0.7)= 162,000

Total difference= 42,000

Answer Link

deebikamadhivanan deebikamadhivanan · Answer 2 · 2022-03-23T07:51:18+01:00

After deducting operational expenses such as labor, depreciation, and cost of goods sold, operating income is an accounting figure that reflects the amount of profit realized from a business's activities (COGS).

What is the operating income of Harvey Automobiles?

The total cost of manufacturing 40,000 pieces is $120,000, which includes $60,000 in fixed costs and $60,000 in variable expenses.

The corporation can get the part for $3.00 per unit from an outside supplier, saving 30% on fixed expenses.

[tex]\text{Make in-house} = 120,000[/tex]

[tex]\text{Buy} = 3\text{ x }40,000 + (60,000 \text { x } 0.7)[/tex]

[tex]\text{Buy} = 162,000[/tex]

[tex]\text{Total difference} = 162,000 - 120,000\\\\text{Total difference}2= 42,000[/tex]

For more information about operating income, refer below

https://brainly.com/question/16037136