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 $14.38 per unit. Per-unit production costs in 2021, when production was 52,000 units, were:
Materials | $5.30 |
Direct labor | 4.30 |
Total overhead | 4.60 |
Total | $14.20 |
$78,000 of X Company's total overhead costs were fixed; $59,280 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 55,700 units.
If X Company continues to make the part instead of buying it in 2022, it will save
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