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Main Menu Contents Grades Course Contents..SECOND Course Contents..SECOND TivtPifo TimerNotes Evaluate Feedback Print Questions 2 and 3 refer to the following information: k Company is considering buying a part next year that they currently make. This year's per-unit production costs or 3,000 units were: Materials Direct labor [all variable] Variable overhead Fixed overhead Total production costs $2.56 4.54 3.40 4.40 $14.90 company has offered to supply this part for $12.86 per unit. If X Company buys the part, $6,600 of the fixed verhead can be avoided. Also if X Company buys the part, it can use the freed-up resources to increase roduction of another product, resulting in additional contribution margin of $2,600. Production next year is also xpected to be 3,000 units. If X Company buys the part instead of making it, it will save 15,320 Submit AnswerIncorrect. Tries 1/3 Previous Tries At what production level would X Company be indifferent between making and buying the part? 490 Subnit AnswerIncorrect. Tries 1/3 Previous Tries

Explanation / Answer

Per unit Make Buy Materials 2.56 7680 Direct labor 4.54 13620 Variable overhead 3.4 10200 Avoidable fixed overhead 6600 Contribution margin 2600 Purchase cost 12.86 38580 Total 40700 38580 X company will save $2120 (40700-38580) 3 Indifferent level=3000+(2120/(12.86-2.56-4.54-3.4))= 3898

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