X Company currently makes a part and is considering buying it next year from a c

Question

X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $16.78 per unit. This year, total costs to produce 57,000 units were:

Of the overhead costs, $108,300 were fixed, and $81,225 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

Make Buy Direct materials 353400 Direct labor 302100 Overhead: Variable 205200 Avoidable fixed 27075 Purchase cost 956460 Total 887775 956460 If Company continues to make the part instead of buying it, it will save $68685(956460-887775)

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