Answer:
Increase in income= $1,215,000
Explanation:
Consider the following details:
Billings Company has the ensuing costs when manufacturing 100,000 units: Variable costs total $600,000, fixed costs are $900,000. An external supplier has proposed to produce the item for $4.50 per unit. Should the choice be made to outsource, the current production facilities might be rented out to another company for $165,000.
It is uncertain whether all fixed costs can be attributed to the current production facilities. We will assume they are.
Total current costs = 600,000 + 900,000 = $1,500,000
Purchase cost = 4.5*100,000 - 165,000 = 285,000
Income increase = 1,500,000 - 285,000 = $1,215,000
