Question
X Company is considering buying a part next year that they currently make. This year's perunit production costs for 90,000 units of this part were:
X Company is considering buying a part next year that they currently make. This year's perunit
production costs for 90,000 units of this part were:
Materials $6.93
Direct labor 5.76
Variable
overhead 3.59
Fixed overhead 1.90
Total $18.18
A company has offered to supply this part for $16.82 per unit. If X Company buys the part,
$82,620 of the total fixed overhead is unavoidable, and there is no alternative use of the
resources that will become idle. Production next year is expected to increase by 3,050 units.
If X Company buys the part instead of continuing to make it, it will save
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