Question
X Company is considering buying a part next year that they currently make. This year's per-unit production costs for 98,000 units of this part were:
X Company is considering buying a part next year that they currently make. This year's per-unit production costs for 98,000 units of this part were:
| Materials | $6.64 |
| Direct labor | 5.54 |
| Variable overhead | 3.75 |
| Fixed overhead | 1.56 |
| Total | $17.49 |
A company has offered to supply this part for $16.64 per unit. If X Company buys the part, $81,026 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 be 102,100 units.
If X Company continues to make the part instead of buying it, it will save?
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
7th Edition
978-0-538-4527, 0-538-45274-9, 978-1133161646
