Question
X Company currently buys a part from a supplier for $12.96 per unit but is considering making the part itself next year. This year, they
X Company currently buys a part from a supplier for $12.96 per unit but is considering making the part itself next year. This year, they purchased 3,300 units of this part; next year, they think they will need 3,800 units. Estimated costs to make the part are:
Per-Unit | Total | ||
Direct materials | $3.57 | $11,781 | |
Direct labor | 3.11 | 10,263 | |
Variable overhead | 3.90 | 12,870 | |
Fixed overhead | 4.70 | 15,510 | |
Total | $15.28 | $50,424 |
Of the estimated fixed overhead, $6,669 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 $2,800; 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 ___________.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started