Q3) X Company is considering buying a part next year that they currently produce
ID: 2463602 • Letter: Q
Question
Q3) X Company is considering buying a part next year that they currently produce. A company has offered to supply this part for $15.67 per unit. This year's per-unit production costs for 51,000 units were:
Of the total overhead costs, $96,900 were fixed, and $64,923 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 $75,000. Production next year is expected to increase to 55,500 units. If X Company buys the part instead of making it, it will save _______
Explanation / Answer
Purchase price = $ 15.67 per unit
Total overhead cost =51,000× 4.5 = $ 229,500
Variable cost = 229,500 - 96,900 = $132,600
Total variable cost
Purchase price = $ 15.67 per unit
Total overhead cost =51,000× 4.5 = $ 229,500
Variable cost = 229,500 - 96,900 = $132,600
Total variable cost
Materials $6.20 Direct labor 5.30 Variable overhead 2.60 Total $14.10 If company buys the part Cost of buying 55,500 × 15.67 = (869,685) Less : avoidable cost variable cost 55,500 ×14.10 + rent income 75,000 + avoidable fixed cost $ 64,923 = 922,473 Saving $ 52,788Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.