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 $16.77 per unit. This year, total costs to produce 50,000 units were: Direct materials Direct labor Overhead 335,000 255,000 230,000 Of the overhead costs, $75,000 were fixed, and $48,000 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 401500 Submit Answer Incorrect. Tries 3/5 Previous Tries

Explanation / Answer

if the company make insteed of buying company will same $66,500

Make   Buy Net Income Increase or (Decrease) Direct Material   $ 335,000 $                                                      (335,000) Direct Labour   $ 255,000 $                                                      (255,000) Variable overhead   $ 155,000 $                                                      (155,000) Fixed Overhead $    75,000 $    48,000 $                                                         (27,000) Purchase Price (50,000*$16.77) $ 838,500 $                                                         838,500 Total Annual Cost $ 820,000 $ 886,500 $                                                           66,500

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