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X Company is considering buying a part next year that they currently make. This year's production costs for 3,000 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 3,000 units were as follows:
Per-Unit | Total | ||
Direct materials | $3.41 | $10,230 | |
Direct labor | 3.46 | 10,380 | |
Variable overhead | 4.20 | 12,600 | |
Fixed overhead | 4.80 | 14,400 | |
Total | $15.87 | $47,610 |
A company has offered to supply this part to X Company for $14.22 per unit. If X Company accepts the offer, it will avoid fixed costs of $7,776, and it will be able to lease the resources that will become available from not making the part for $2,100. At what production level would X Company be indifferent between making and buying the part next year?
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