How will the decision affect the company

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Reference no: EM131947159

Question: Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component, Component Y, for one of its products are given below. The annual requirement of Component Y is 2,200 units. Direct materials $19,800 Direct labor 11,000 Variable manufacturing overhead 15,400 Fixed manufacturing overhead 13,200 An external supplier offers to sell the component to Blanrin Inc. for $23 per unit. After analysis, it is found that if the company buys the component instead of producing it, all of its variable costs and $8, 200 of its fixed overhead costs will be eliminated. If Blanrin Inc. decides to buy the component instead of manufacturing it, how will the decision affect the company? Its net income will decrease by $3,800 Its net income will increase by $3,800 Its net income will increase by $4, 400 Its net income will increase by $8,200.

Reference no: EM131947159

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