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 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 $25.82 per unit. This year, production was 11,000 units; next year, production is expected to be 13,850 units. Total production costs for the part this year were:
Materials | $114,290 |
Direct labor | 98,560 |
Variable overhead | 65,340 |
Fixed overhead | 25,300 |
Total | $303,490 |
$6,325 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 13,850 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year?
Tries 0/5 |
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