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X Company currently buys a part from a supplier for $12.25 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $12.25 per unit but is considering making the part itself next year. This year, they purchased 3,100 units of this part; next year, they will need 3,400 units. Estimated costs to make the part next year are: Per- Total Unit Direct materials $2.47 $7,657 Direct labor 4.35 13,485 Variable 2.60 overhead 8,060 Fixed overhead 5.40 16,740 Total $14.82 $45,942 of the estimated fixed overhead, $8,035 are common costs that would be allocated to the part; the remainder would be additional fixed overhead costs. X Company currently receives $2,500 a year by renting unused factory space, but it will have to use this space to make the part. If X Company continues to buy the part instead of making it, it will save
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