X Company currently buys a part from a supplier for $11.89 per unit but is consi

Question

X Company currently buys a part from a supplier for $11.89 per unit but is considering making the part itself next year. This year, they purchased 3,100 units of this part; next year, they think they will need 3,400 units. Estimated costs to make the part are: Per-Unit Total Direct materials Direct labor Variable overhead Fixed overhead Total S2.82$8,742 3.48 10,788 3.10 9,610 3.70 11,470 S13.10 $40,610 Of the estimated fixed overhead, $4,817 are common costs that would be allocated to the part the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,700; it will have to use this space to make the part. If X Company continues to buy the part instead of making it, it will save Tries 0/5 Submit Answer

Explanation / Answer

Cost of Savings per unit = $12.15 - $11.89

..........................................= $0.26

Particulars Amount Amount Cost of making 3,400 units Per unit Total Direct Material $2.82 $9,588.00 Direct Labor $3.48 $11,832.00 Variable Overhead $3.10 $10,540.00 Fixed Overhead $6,653 Opportunity Cost $2,700 Total Cost $41,313.00 No. of units 3,400 Cost of making per unit $12.15

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