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X Company is considering buying a part next year that they currently make. This year's production costs for 3,200 units were: Total Per-Unit Materials $8,512

X Company is considering buying a part next year that they currently make. This year's production costs for 3,200 units were:

Total Per-Unit
Materials $8,512 $2.66
Direct labor [all variable] 15,936 4.98
Variable overhead 10,880 3.40
Fixed overhead 9,920 3.10
Totals $45,248 $14.14

A company has offered to supply this part for $13.38 per unit. If X Company buys the part, $4,960 of the fixed overhead can be avoided. Also if X Company buys the part, it can use the freed-up resources to increase production of another product, resulting in additional contribution margin of $2,700. Production next year is also expected to be 3,200 units.

3. If X Company buys the part instead of making it, it will save

4. X Company is uncertain what production will be next year. At what production level would it be indifferent between making and buying the part?

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