Answered step by step
Verified Expert Solution
Question
1 Approved Answer
X Company is considering buying a part next year that they currently make. This year's production costs for 3,400 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 3,400 units were as follows:
Per-Unit | Total | ||
Direct materials | $2.98 | $10,132 | |
Direct labor | 3.57 | 12,138 | |
Variable overhead | 4.00 | 13,600 | |
Fixed overhead | 4.70 | 15,980 | |
Total | $15.25 | $51,850 |
A company has offered to supply this part to X Company for $13.94 per unit. If X Company accepts the offer, it will avoid fixed costs of $8,629, and it will be able to lease the resources that will become available from not making the part for $2,700. At what production level would X Company be indifferent between making and buying the part next year?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started