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 $16.01 per unit. This year, total costs to produce 55,000 units were: Direct materials Direct labor Overhead $324,500 302,500 280,500 Of the overhead costs, $110,000 were fixed, and $71,500 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 324500 Direct labor 302500 Avoidable overhead 209000 Purchase cost 880550 Total cost 836000 880550 X company will save $44550(880550-836000)

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