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 $17.86 per unit. This year's total production costs for 56,000 units were: Materials $392,000 Direct labor [all variable] 257,600 Total overhead 341,600 Total production costs $991,200 Of the total overhead costs, $95,200 were fixed, and $58,072 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 $80,000. Production next year is expected to increase to 59,150 units. If X Company buys the part instead of making it, it will save

Explanation / Answer

Per unit 59150 units Make Buy Make Buy Materials 7 414050 Direct labor 4.6 272090 Variable overhead 4.4 260260 Fixed overhead 58072 Purchase cost 17.86 1056419 Opportunity cost 80000 Total 1084472 1056419 If X Company buys the part instead of making it, it will save $28053(1084772-1056419)

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.