Question
X Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $9.36X + $19,040,
X Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $9.36X + $19,040, where X is the number of units produced. A company has offered to supply this part to X Company for $11.89 per unit. If X Company chooses to buy the part, it will still incur fixed costs of $8,187, but it will be able to sell some of the equipment that it used to make the part for $2,300. Last year, 3,400 units of the part were produced; next year, 3,900 units will be needed.
1. If X Company buys the part next year instead of making it, it will save _____ 2. At what production level would X Company be indifferent between making and buying the part next year? _____
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