Answered step by step
Verified Expert Solution
Question
1 Approved Answer
X Company currently makes 2,800 units of a unique part for one of its finished products. Variable production costs for this part are $12.27 per
X Company currently makes 2,800 units of a unique part for one of its finished products. Variable production costs for this part are $12.27 per unit; fixed costs associated with this part are $15,000 per year. A company has offered to supply X Company with the part for a price of $16.00 per unit. For X Company, the bad news is that it will have to inspect the parts upon arrival, requiring rental of a special machine for $3,300 per year and per-unit inspection costs of $3.30. The good news is that if it buys the part, not only can it avoid all of the fixed costs associated with the production of the part, but it can use the released production facilities to generate $17,000 per year. At what production level would X Company be indifferent between making the part and buying it? OA: 3,070 | OB: 4,083 OC: 5,430 | OD: 7,222 OE: 9,605 OF: 12,774 Tries 0/99
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