Question
X Company currently buys a part from a supplier for $13.09 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $13.09 per unit but is considering making the part itself next year. This year, they purchased 3,000 units of this part; next year, they think they will need 3,300 units. Estimated costs to make the part are: Per-Unit Total Direct materials $3.02 $9,060 Direct labor 3.29 9,870 Variable overhead 4.30 12,900 Fixed overhead 5.90 17,700 Total $16.51 $49,530 Of the estimated fixed overhead, $8,850 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,200; 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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