Reference no: EM131755088

Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. The company can buy the part from an outside supplier for $3.50 per unit, and avoid 30% of the fixed costs.

If Cuyahoga Valley Bicycles makes the part, how much will its operating income be?

A. $90,400 less than if the company bought the part
B. $47,600 greater than if the company bought the part
C. $45,600 less than if the company bought the part
D. $49,600 greater than if the company bought the part