Question
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
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
DM 3.59 11129
DL 4.89 15159
VOH 2.7 8370
FOH 3.2 9920
TOTAL 14.38 44578
A company has offered to supply this part to X Company for $14.29 per unit. If X Company accepts the offer, it will avoid fixed costs of $4,861, and it will be able to lease the resources that will become available from not making the part for $2,800.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