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X Company no longer has the space necessary to produce all of its parts. A company has offered to supply one of X Company's parts
X Company no longer has the space necessary to produce all of its parts. A company has offered to supply one of X Company's parts for $25.20 per unit. This year, production was 11,000 units; next year, production is expected to be 14,450 units. Total production costs for the part this year were: Materials Direct labor Variable overhead Fixed overhead Total $110,990 97,130 62,370 41,800 $312,290 $6,270 of X Company's fixed overhead can be avoided if it buys the part. In addition, if X Company buys the part, it will be able to rent some equipment that will no longer be needed, to a company for $2,500. X Company is uncertain about its 14,450 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year? A: 12,723 B: 14,377 C: 16,246 D: 18,358 E: 20,745 F: 23,441
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