Question
X Company is considering buying a part in 2022 that it currently makes. A company has offered to supply this part to X Company for
X Company is considering buying a part in 2022 that it currently makes. A company has offered to supply this part to X Company for $16.05 per unit. Per-unit production costs in 2021, when production was 56,000 units, were:
Materials | $5.70 |
Direct labor | 4.50 |
Total overhead | 5.30 |
Total | $15.50 |
$72,800 of X Company's total overhead costs were fixed; $51,688 of these fixed costs are unavoidable even if it buys the part. If X Company buys the part, there is nothing it can do with the resources that will become idle.
Production in 2022 is expected to be 60,350 units.
If X Company continues to make the part instead of buying it in 2022, it will save_____
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