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X Company is considering buying a part next year that they currently make. This years production costs for 3,000 units were: Total Per-Unit Direct materials
X Company is considering buying a part next year that they currently make. This years production costs for 3,000 units were: Total Per-Unit Direct materials $11, 670 $3.89 Direct labor 12, 870 4.29 Variable overhead 10, 200 3.40 Fixed overhead 13, 500 4.50 Total $48, 240 $16.08 A company has offered to supply this part for $14.07 per unit. If X Company buys the part, $7, 560 of the fixed overhead can be avoided. Also if X Company buys the part, it can use the freed-up resources to increase production of another product, resulting in additional contribution margin of $2, 200 Production next year is expected to be 3, 300 units. If X Company buys the part instead of making it, it will save __________ X Company is uncertain what production will be next year. What production level would make X Company indifferent between making and buying the part? _____________
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