Questions 3 and 4 refer to the following information: X Company currently makes
ID: 2574554 • Letter: Q
Question
Questions 3 and 4 refer to the following information: X Company currently makes a part and is considering buying it from a company has offered to supply it for $15.93 per unit. This year, per-unit production costs to produce 53,000 units were: Direct materials Direct labor Overhead Total $5.80 5.00 5.20 $16.00 $180,200 of the total overhead costs were variable; $20,034 of the fixed overhead costs can be avoided if X Company buys the part. In addition, the resources that were used for production can be rented to another company for $75,000. Production next year is expected to increase to 57,600 units 3. If X Company continues to make the part instead of buying it, it will save 95254 Submit Answer Incorrect. Tries 4/5 Previous Tries 4. X Company is uncertain about next year's production level. At what production level will the company be indifferent between making and buying the part? Submit Answer Tries 0/5Explanation / Answer
No of units produced this year = 53,000
No of units to be produced next year = 57,600
Variable overhead per unit = 180,200 / 53,000 = 3.4
Avoidable fixed costs = 20,034
Additional fixed costs = 75,000
3.
Relavent costs = Direct materils + Direct labour + Variable overhead + Avoidable fixed costs + Additional fixed costs
= (5.8 * 57,600) + (5 * 57,600) + (3.4 * 57,600) + 20,034 + 75,000
= 912,954
Relavent cost per unit = 912,954 / 57,600 = 15.85
Savings = (15.93 - 15.85) * 57,600 = 4,608
4.
[(Direct materils + Direct labour + Variable overhead) * No of units] + Avoidable fixed costs + Additional fixed costs = No of units * Cost per unit
[(5.8 + 5 + 3.4) * No of units] + 20,034 + 75,000 = No of units * 15.93
14.2 * No of units + 95,034 = 15.93 * No of units
No of units = 54,933.
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