X Company currently buys a part from a supplier for $13.12 per unit but is consi

Question

X Company currently buys a part from a supplier for $13.12 per unit but is considering making the part itself next year. This year, they purchased 3,100 units of this part; next year, they think they will need 3,500 units. Estimated costs to make the part are:

Of the estimated fixed overhead, $6,101 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,300; it will have to use this space to make the part. If X Company continues to buy the part instead of making it, it will save

Per-Unit Total      Direct materials $2.30    $7,130    Direct labor 4.56    14,136    Variable overhead 3.80    11,780    Fixed overhead 4.80    14,880    Total $15.46    $47,926   

Explanation / Answer

Cost of manufacturing Amount($) Per Unit Total ($) Material 2.3 8,050 Direct Labor 4.56 15,960 Variable overhead 3.8 13,300 Fixed overhead 4.8 16,800 Total 15.46 54,110 Cost Of Buying Amount($) Per Unit Total($) Cost Of Buying 13.12 45,920 + Fixed Exenses 6,101 - Rental Income -2,300 Total 49,721 Total Savings (54110-49721) 4,389

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