X Company is considering buying a part next year that they currently produce. A
ID: 2461910 • Letter: X
Question
X Company is considering buying a part next year that they currently produce. A company has offered to supply this part for $16.93 per unit. This year's per-unit production costs for 57,000 units of this part were:
Of the total fixed overhead costs, $108,300 were fixed, and $84,474 of these fixed overhead costs are unavoidable. If X Company buys the part, the resources that were used for production can be rented to another company for $75000. Production next year is expected to decrease to 61,450 units.
4. If X Company buys the part instead of making it, it will save?
Please show work. Thank you!
Materials $5.80 Direct labor [all variable] 5.30 Total overhead 6.20 Total $17.3Explanation / Answer
Units per unit total Material 61450 5.8 356410 Labor 61450 5.3 325685 total Overhead 61450 6.2 380990 total Production cost 1063085 Cost of Buying Units cost per unit Total cost of Purchase 61450 16.93 1040349 Unavoildable cost 84474 total cost of purchase 1124823 rental income 75000 total cost of purchase 1049823 Net Saving from purchasing the product 13262.5 company should opt for purchasing it from the market
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