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X Company is considering buying a part next year that they currently make. This year's production costs for 3,300 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 3,300 units were as follows:
Per-Unit | Total | ||
Direct materials | $3.74 | $12,342 | |
Direct labor | 3.09 | 10,197 | |
Variable overhead | 4.30 | 14,190 | |
Fixed overhead | 5.20 | 17,160 | |
Total | $16.33 | $53,889 |
A company has offered to supply this part to X Company for $14.58 per unit. If X Company accepts the offer, it will still incur fixed costs of $8,923, but it will be able to lease the resources that will become available from not making the part for $3,000. At what production level would X Company be indifferent between making and buying the part next year?
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