Question
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
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 $24.95 per unit. This year, production was 15,000 units; next year, production is expected to be 17,500 units. Per-unit production costs for the part this year were: Materials Direct labor $10.15 8.62 Variable 5.66 overhead Fixed overhead Total 3.50 $27.93 $45,150 of X Company's fixed overhead cannot be avoided even 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 another company for $2,000. If X Company buys the part instead of continuing to make it, it will save A: $250 B: $362 C: $526 D: $762 E: $1,105 F: $1,602
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