X Company currently buys a part from a supplier for $13.86 per unit but is consi

Question

X Company currently buys a part from a supplier for $13.86 per unit but is considering making the part itself next year. This year, they purchased 3,400 units of this part; next year, they think they will need 3,800 units. Estimated costs to make the part are:

Of the estimated fixed overhead, $6,038 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,100; it will have to use this space to make the part. If X Company makes the part instead of buying it, it will save?

The answer is not 10762, 6672, 640, or 2856!

Per-Unit Total      Direct materials $3.37    $11,458    Direct labor 4.58    15,572    Variable overhead 3.60    12,240    Fixed overhead 3.70    12,580    Total $15.25    $51,850   

Explanation / Answer

Determine make or buy :

If company makes part instead of buying it, it will save $136...

Make Buy Direct materials 12806 direct labour 17404 variable overead 13680 fixed overhead 6542 purchase cost 52668 Opportunity cost 2100 Total 52532 52668

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.