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 $17.57 per unit. This year's total production costs for 53,000 units were: Materials Direct labor [all variable] Total overhead Total production costs $307,400 291,500 286.200 $885,100 Of the total overhead costs, $53,000 wre fxed, and $32,330 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 56,700 units. If X Company continues to make the part instead of buying it, it will save Submit Answer Tries 0/3

Explanation / Answer

Per unit Make Buy Direct materials 5.8 328860 Direct labor 5.5 311850 Variable manufacturing overhead 4.4 249480 Fixed manufacturing overhead 20670 Contribution margin 80000 Purchase cost 996219 Total cost 990860 996219 Savings in cost $5359 (996219-990860)

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