Question
X Company currently buys a part from a supplier for $11.85 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $11.85 per unit but is considering making the part itself next year. This year, they purchased 3,400 units of this part; next year, they will need 3,800 units. Estimated costs to make the part next year are: Per-Unit Total Direct materials $2.77 $9,418 Direct labor 3.21 10,914 Variable overhead 2.90 9,860 Fixed overhead 3.20 10,880 Total $12.08 $41,072 Of the estimated fixed overhead, $6,419 would be additional fixed overhead costs; the remainder would be common costs allocated to the part. X Company currently receives $2,600 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
A: $513 B: $744 C: $1,078 D: $1,563 E: $2,267 F: $3,287
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