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X Company is considering buying a part next year that they currently make. This year's production costs for 3,000 units were as follows: Per-Unit Total
X Company is considering buying a part next year that they currently make. This year's production costs for 3,000 units were as follows:
Per-Unit | Total | ||
Direct materials | $3.54 | $10,620 | |
Direct labor | 3.47 | 10,410 | |
Variable overhead | 2.80 | 8,400 | |
Fixed overhead | 3.90 | 11,700 | |
Total | $13.71 | $41,130 |
A company has offered to supply this part to X Company for $13.10 per unit. If X Company accepts the offer, it will avoid fixed costs of $5,499, and it will be able to lease the resources that will become available from not making the part for $2,200. At what production level would X Company be indifferent between making and buying the part next year?
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