Use the following to answer questions 28-29:
Anderson Co. makes and uses 5,000 components each year in its manufacturing operations. An outside supplier has offered to supply the components to Anderson at $66 per unit. Anderson’s production costs are as follows:
Direct materials $ 8
Direct labor 32
Variable overhead 12
Fixed overhead (based on normal capacity) 34
If Anderson accepts the order, $8 of fixed overhead per unit will be eliminated.
What is the relevant cost to produce one unit?
A) $52
B) $78
C) $60
D) $86
If the offer is accepted, operating income will
A) decrease by $30,000.
B) increase by $60,000.
C) decrease by $70,000.
D) increase by $100,000.
