Question
X Company is considering buying a part next year that they currently produce. A company has offered to supply this part for $14.19 per unit.
X Company is considering buying a part next year that they currently produce. A company has offered to supply this part for $14.19 per unit. This year's per-unit production costs for 55,000 units of this part were:
Materials | $5.30 |
Direct labor [all variable] | 5.50 |
Total overhead | 4.60 |
Total | $15.40 |
Total fixed overhead was $110,000, all common and unavoidable. If X Company buys the part, the resources that were used for production can be rented out for $75,000. Production next year is expected to decrease to 51,550 units. 4. If X Company buys the part instead of making it, it will save
5. X Company is uncertain about next year's production level. At what production level will the company be indifferent between making and buying?
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