X Company is considering buying a part next year that they currently make. A com

Question

X Company is considering buying a part next year that they currently make. A company has offered to supply this part for $17.22 per unit. This year's total production costs for 50,000 units were: Materials Direct labor [all variable] Total overhead Total production costs $265,000 285,000 300,000 $850,000 Of the total overhead costs, $85,000 were fixed, and $62,900 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 $70,000. Production next year is expected to increase to 53,950 units. If X Company continues to make the part instead of buying it, it will save rXCompany coninues to omake Submit Answer Tries 0/.3

Explanation / Answer

Differential analysis :

If company make the part instead of buying it, it will save 11484

Make Buy Direct material 285935 Direct labour 307515 Variable manufacturing overhead 231985 Fixed manufacturing overhead 22100 Opportunity cost 70000 Purchase cost 929019 Total 917535 929019

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