X Company is considering buying a part next year that they currently make. A com
ID: 2510944 • Letter: X
Question
X Company is considering buying a part next year that they currently make. A company has offered to supply this part for $18.86 per unit. This year's total production costs for 54,000 units were:
Of the total overhead costs, $91,800 were fixed, and $61,506 of these fixed overhead costs were unavoidable. If X Company buys the part, the resources that were used for production can be rented out for $75,000. Production next year is expected to increase to 58,600 units. If X Company buys the part instead of making it, it will save
Explanation / Answer
Per unit 58600 units Make Buy Make Buy Materials 6.9 404340 Direct labor 6 351600 Variable overhead 4.4 257840 Fixed overhead 91800 61506 Purchase cost 18.86 1105196 Opportunity cost 75000 Total 1180580 1166702 If X Company buys the part instead of making it, it will save $13878(1180580-1166702)
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