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Fanning Corporation, which makes and sells 81,000 radios annually, currently purchases the radio speakers it...

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Accounting

Fanning Corporation, which makes and sells 81,000 radios annually, currently purchases the radio speakers it uses for $15 each. Each radio uses one speaker. The company has idle capacity and is considering the possibility of making the speakers that it needs. Fanning estimates that the cost of materials and labor needed to make speakers would be a total of $13 for each speaker. In addition, supervisory salaries, rent, and other manufacturing costs would be $171,000. Allocated facility-level costs would be $98,300.
Required
a. Determine the change in net income Fanning would experience if it decides to make the speakers.
Answer is complete but not entirely correct.
Net income will be
lower
by
$ 107,300
image

Answer & Explanation Solved by verified expert
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