X Company is considering buying a part next year that they currently make. A com

Question

X Company is considering buying a part next year that they currently make. A company has offered to supply this part for $16.47 per unit. This year's total production costs for 55,000 units were: Materials Direct labor all variable] 330,000 Total overhead 264,000 Total production $907,500 costs $313,500 Of the total overhead costs, $93,500 were fixed, and $62,645 of these fixed overhead costs were unavoidable. If X Company buys the part, the resources that were used for production can be rented out for $75,000. Production next year is expected to increase to 58,000 units. If X Company buys the part instead of making it, it will save ( Submit AnswerTries 0/3

Explanation / Answer

If X Company continues to make the part instead of buying it, it will save $8,995 Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Make Buy Differential Materials = 313500/55000*58000       330,600.00            330,600.00 Direct labour = 330000/55000*58000       348,000.00            348,000.00 Variable overhead = (264000 - 93500)/55000*58000       179,800.00            179,800.00 Fixed Overhead = 93500 - 62645          30,855.00               30,855.00 Purchase cost = 58000*16.47       955,260.00          (955,260.00) Rental Income       (75,000.00)               75,000.00 Total Relevant costs       889,255.00       880,260.00                 8,995.00

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