Question
X Company is considering buying a part next year that it currently makes. A company has offered to supply this part for $17.44 per unit.
X Company is considering buying a part next year that it currently makes. A company has offered to supply this part for $17.44 per unit. This year's total production costs for 56,000 units were: Materials $364,000 Direct labor 274,400 Total overhead 336,000 $252,000 of X Company's total overhead costs were variable; $30,240 of X Company's fixed overhead costs can be avoided if it buys the part. If X Company buys the part, there are no alternative uses of the resources that were used for its production. Production next year is expected to increase to 60,450 units. 3. If X Company continues to make the part instead of buying it, it will save Tries 0/3 4. X Company has an opportunity to negotiate the purchase price with the supplier. What purchase price would make X Company indifferent between making and buying?
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