X Company is considering buying a part next year that they currently make. A company has offered to supply it for $13.07 per unit. This year's production costs for 3,200 units were as follows: Per-Unit $2.50 4.28 Direct materials Direct labor Total overhead Total costs Total $8,000 13,696 27,520 $49,216 8.60 $15.38 $11,520 of total overhead is variable. If X Company chooses to buy the part, it will still incur fixed costs of $6,720. 1. If X Company buys the part next year instead of making it, and production is expected to remain at 3,200 units, it will save A: $220 B: $275 C: $344 D: $430 E: $538 F: $672 Submit Answer Tries 0/99 2. If X Company makes the part next year instead of buying it, and production next year is expected to be 3,500 units, it will save A: $135B: $180oC: $239 OD: $318 E: $422OF: $562 X Company currently makes 2,700 units of a unique part for one of its finished products. Variable production costs for this part are $12.74 per unit; fixed costs associated with this part are $15,000 per year. A company has offered to supply X Company with the part for a price of $15.20 per unit. For X Company, the bad news is that it will have to inspect the parts upon arrival, requiring rental of a special machine for $2,500 per year and per-unit inspection costs of $3.10. The good news is that if it buys the part, not only can it avoid all of the fixed costs associated with the production of the part, but it can use the released production facilities to generate $16,000 per year. At what production level would X Company be indifferent between making the part and buying it? A: 3,281 B: 4,101 C: 5,126 D: 6,407 E: 8,009 F: 10,012 The following information is for Questions 4 and 5 During the year, X Company sold 63,800 units of one of its products for $18.00 each. The following cost functions are for these regular production and sales levels: Cost of goods sold: $6.09X + $125,048 Selling and administrative expenses: $2.79X + $72,732 Variable selling and administrative expenses include sales commissions equal to 2% of sales. At the end of the year, a company offered to buy 4,190 units but was only willing to pay $11.00 each. X Company had the capacity to produce the 4,190 units. 4. If X Company had accepted the special order, firm profits would have increased by A: $2,911 B: $3,638 C: $4,548 D: $5,685 E: $7,106 F: $8,883 Submit Answer Tries 0/99 5. Now assume that there would not have been sales commissions for the special order. If X Company had accepted the special order, firm profits would have increased by A: $6,488 B: $7,591 |C: $8,881 D: $10,391 E: $12,158 F: $14,225