Question
X Company currently buys a part from a supplier for $12.06 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $12.06 per unit but is considering making the part itself next year. This year, they purchased 3,000 units of this part; next year, they will need 3,300 units. Estimated costs to make the part next year are:
Per-Unit | Total | ||
Direct materials | $2.79 | $8,370 | |
Direct labor | 3.78 | 11,340 | |
Variable overhead | 2.60 | 7,800 | |
Fixed overhead | 4.10 | 12,300 | |
Total | $13.27 | $39,810 |
Of the estimated fixed overhead, $5,166 are common costs that would be allocated to the part; the remainder would be additional fixed overhead costs. X Company currently receives $2,300 a year by renting unused factory space, but it will have to use this space to make the part.
If X Company makes the part instead of continuing to buy it, it will save __
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