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.