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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 | $2.76 | $8,280 | |
Direct labor | 3.75 | 11,250 | |
Variable overhead | 3.60 | 10,800 | |
Fixed overhead | 5.00 | 15,000 | |
Total | $15.11 | $45,330 |
A company has offered to supply this part to X Company for $13.34 per unit. If X Company accepts the offer, it will avoid fixed costs of $7,950, and it will be able to lease the resources that will become available from not making the part for $2,300. At what production level would X Company be indifferent between making and buying the part next year?
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