Question
X Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $10.49X + $12,400,
X Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $10.49X + $12,400, where X is the number of units produced. A company has
offered to supply this part to X Comany it for $13.28 per unit. If X Company chooses to buy the part, it will still incur fixed costs of $7,440, but it will be able to lease the resources that will become available
from not making the part for $2,400.
1. If X Company makes the part next year instead of buying it, and production is expected to remain at 3,100 units, it will save
A: $1.009
B: $1.141
c- $1.289
D- $1.457
E: $1.646
F. $1.860
2. If X Company makes the part next year instead of buying it, and production next year is expected to be 3,600 units, it will save
A: $1.374
B: $1.718
c- $2.147
D: $2.684
E: $3.355
F: $4.194
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