Answered step by step
Verified Expert Solution
Question
1 Approved Answer
X Company is considering buying a part next year that they currently make. This year's production costs for 3,100 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 3,100 units were as follows:
Per-Unit | Total | ||
Direct materials | $2.64 | $8,184 | |
Direct labor | 3.09 | 9,579 | |
Variable overhead | 4.30 | 13,330 | |
Fixed overhead | 3.00 | 9,300 | |
Total | $13.03 | $40,393 |
A company has offered to supply this part to X Company for $13.37 per unit. If X Company accepts the offer, it will still incur fixed costs of $4,464, but it will be able to lease the resources that will become available from not making the part for $2,000. At what production level would X Company be indifferent between making and buying the part next year?
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