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X Company is considering buying a part next year that they currently make. This year's total production costs for 3,000 units of this part were:
X Company is considering buying a part next year that they currently make. This year's total production costs for 3,000 units of this part were:
Materials | $8,400 |
Direct labor [all variable] | 10,530 |
Variable overhead | 8,700 |
Fixed overhead | 10,200 |
Total | $37,830 |
A company has offered to supply this part for $10.35 per unit. If X Company buys the part, $5,304 of the fixed overhead can be avoided.
If production next year is expected to be 3,300 units, how much can X Company save by buying the part instead of making it?
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