Ferguson Company manufactures 4,000 parts per year; the parts are used in the assembly of one of the company's products. The unit product cost of these parts is:
Variable manufacturing cost $32
Fixed manufacturing cost 18
Unit product cost $50
The part can be purchased from an outside supplier at $40 per unit. If the part is purchased from the outside supplier, two-thirds of the fixed manufacturing costs can be eliminated. What would be the annual impact on the company's net operating income as a result of buying the part from the outside supplier?
A. $8,000 increase
B. $8,000 decrease
C. $16,000 increase
D. $16,000 decrease
