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X Company is considering buying a part next year that they currently make. This year's production costs for 3,500 units were as follows: Per-Unit Total
X Company is considering buying a part next year that they currently make. This year's production costs for 3,500 units were as follows:
Per-Unit | Total | ||
Direct materials | $3.77 | $13,195 | |
Direct labor | 3.24 | 11,340 | |
Variable overhead | 2.60 | 9,100 | |
Fixed overhead | 3.40 | 11,900 | |
Total | $13.01 | $45,535 |
A company has offered to supply this part to X Company for $13.09 per unit. If X Company accepts the offer, it will avoid fixed costs of $5,950, and it will be able to lease the resources that will become available from not making the part for $2,000. At what production level would X Company be indifferent between making and buying the part next year?
A: 1,462 | B: 1,828 | C: 2,284 | D: 2,856 | E: 3,570 | F: 4,462 |
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