Managerial Accounting: Hoboken Industries currently manufactures 36,000 units of part MR24 each month for use in production of several of its products. The facilities now used to produce part MR24 have a fixed monthly cost of $180,000 and a capacity to produce 87,000 units per month. If the company were to buy part JR63 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40 percent of their present amount. The variable production costs of part MR24 are $11 per unit.

Need help with getting the $108,000???

Given Explanation (but unclear on the steps ???)

1.

If the company buys 36,000 units of part MR24, at a price of $Xper unit, its total cost will be:

(36,000 $X) + $108,000 (How did the $108,000 appear???)

If the company manufactures the parts, its total cost will be:

(36,000 $11) + $180,000

By equating these two expressions for total cost, we can solve for the price,X,at which the total cost is the same under the two alternatives:

36,000X+ $108,000=(36,000) (11) + $180,000 (Unclear since....(36,000 x 11) + 180,000 = 576,000)) (Is a step missing???)

36,000X=468,000 (How did you get $468,000 ???)

X=13

Thus the firm will realize a net benefit by purchasing part MR24 if the outside supplier charges a price less than $13.