Q1

X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $16.14 per unit. This year, total costs to produce 66,000 units were: Direct $468,600 materials Direct labor Variable overhead Fixed overhead 283,800 270,600 270,600 If X Company buys the part, $54,120 of the fixed overhead is avoidable. The resources that will become idle if they choose to buy the part can be used to increase production of another product, resulting in additional total contribution margin of $10,000. The marketing manager estimates that demand next year will increase to 70,650 units. If X Company buys the part instead of making it, it will save A: $10,260 OB: $11,594 C: $13,101 TOD: $14,805 E: $16,729 OF: $18,904