Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Z Company currently makes 2,300 units of a unique part for one of its finished products. Variable production costs for this part are $13.92 per

Z Company currently makes 2,300 units of a unique part for one of its finished products. Variable production costs for this part are $13.92 per unit; fixed costs associated with this part are $15,000 per year.

A company has offered to supply Z Company with the part for a price of $16.00 per unit. For X Company, the bad news is that it will have to inspect the parts upon arrival, requiring rental of a special machine for $2,000 per year and per-unit inspection costs of $2.70. The good news is that if it buys the part, not only can it avoid all of the fixed costs associated with the production of the part, but it can use the released production facilities to generate $17,000 per year.

At what production level would Z Company be indifferent between making the part and buying it?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forensic And Investigative Accounting

Authors: Professor D. Larry Crumbley, Lester E. Heitger, G. Stevenson Smith

8th Edition

0808046241, 9780808046240

More Books

Students also viewed these Accounting questions

Question

Describe ERP and how it can create efficiency within a business

Answered: 1 week ago

Question

2. How is communication defi ned?

Answered: 1 week ago

Question

=+Understand the different types of personal brands in social media

Answered: 1 week ago