X Company currently makes a part and is considering buying it from a company has

Question

X Company currently makes a part and is considering buying it from a company has offered to supply it for $14.73 per unit. This year, per-unit production costs to produce 57,000 units were: Direct materials Direct labor Overhead Total $5.40 4.80 4.50 $14.70 $171,000 of the total overhead costs were variable; $23,940 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 $70,000. Production next year is expected to increase to 61,000 units. 3. If X Company buys the part instead of making it, it will save Submit Answer Tries 0/5 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 0/5

Explanation / Answer

3) Determine make or buy :

If X company buy the part instead of making it, it will save (899140-898530) = 610

4) Indifferrent poing :

Manufacturing cost = Buying cost

13.2X+93940 = 14.73X

13.2X-14.73X   = -93940

-1.53X             = -93940

X(indifferenct point) = 61399 Units

Make Buy direct material 329400 direct labour 292800 variable manufacturing overhead 183000 Fixed manufacturing overhead 23940 Purchase cost 898530 opportunity cost 70000 Total 899140 898530

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

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