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Question(s) / Instruction(s):

DC Electronics uses a standard part in the manufacture of several of its radios. The cost of producing 30,000 parts is $90,000, which includes fixed costs of $33,000, and variable costs of $57,000. The company can buy the part from an outside supplier for $2.50 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $11,600 profit. If DC Electronics makes the part, what will its operating income be?

A.            It will be $3,400 less than if the company bought the part

B.            It will be $3,500 less than if the company bought the part

C.            It will be $1,700 greater than if the company bought the part

D.            It will be $19,700 greater than if the company bought the part

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