Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

X Company currently buys a part from a supplier for $13.84 per unit but is considering making the part itself next year. This year, they

X Company currently buys a part from a supplier for $13.84 per unit but is considering making the part itself next year. This year, they purchased 3,300 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 $3.16 $10,428
Direct labor 4.18 13,794
Variable overhead 3.70 12,210
Fixed overhead 3.70 12,210
Total $14.74 $48,642

Of the estimated fixed overhead, $6,593 would be additional fixed overhead costs; the remainder would be common costs allocated to the part. X Company currently receives $2,800 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

11th Edition

9781118566671

Students also viewed these Accounting questions