EXAM 1 12 and 13 K Company ls considering buying a part next year that they curr

Question

EXAM 1 12 and 13 K Company ls considering buying a part next year that they currently make. This year's production costs for 3,300 units were Total Per-Unit Direct labor Variable overhead fixed overhead Total 16,005 11,550 18,150 A company has offered to supply this part for $14.06 per unit. If x Company buys the part, $10,346 of the fxed overhead can be avoided. Aiso if x Company buys the part, it can use the freed-up resources to increase production of another product, resulting in addtional contribution margin of $2,900. Production next year is expected to be 3,700 units Answer Tries 0/3 MacBook Pro 0

Explanation / Answer

12) Analysis :

if X company buy the part instead of making it, it will save = 4403

13) Indifferent point

Manufacturing cost = Purchase cost

11.67X+13246 = 14.06X

2.39X = 13246

X(unit) = 5542 unit

Indifferent point = 5542 units

Make Buy Direct material 12284 DIrect labour 17945 variable overhead 12950 Fixed overhead 10346 Opportunity cost 2900 Purchase cost 52022 Total relevant cost 56425 52022

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