X Company currently makes a part and is considering buying it next year from a c
ID: 2573935 • Letter: X
Question
X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $14.51 per unit. This year, total costs to produce 58,000 units were:
Of the overhead costs, $98,600 were fixed, and $60,146 of these fixed overhead costs are unavoidable even if X Company buys the part. Production next year is not expected to change. If X Company continues to make the part instead of buying it, it will save __________.
Explanation / Answer
Total cost in case of making decision
290,000
8,29,400
Total cost in case of Buying decision
841580(58000*14.51)+ 60,146(unavoidable cost )
= 901726
thus saving in making decision =
= 901726-829400
=$ 72,326
Direct materials $290,000 Direct labor 249,400 Overhead290,000
8,29,400
Total cost in case of Buying decision
841580(58000*14.51)+ 60,146(unavoidable cost )
= 901726
thus saving in making decision =
= 901726-829400
=$ 72,326
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