Question

An outside supplier has offered to sell the component for $17. If Bryon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $10,000. If Bryon purchases the component from the supplier instead of manufacturing it, the effect on income would be

Answer 1

There would be a $10,000 increase

Step-by-step explanation:

Remember, Bryon operates a manufacturing firm that could be rented which is going to be an inflow of income to the company account.

However, doing otherwise implies he will expend $17, without any inflow but an outflow of income. Thus, If Bryon purchases the component from the supplier instead of manufacturing it, the effect on income would be a $10,000 increase.