X Company currently makes a part and is considering buying it next year from a c
ID: 2574017 • Letter: X
Question
X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $17.34 per unit. This year, total costs to produce 56,000 units were:
Of the overhead costs, $56,000 were fixed, and $34,160 of these fixed overhead costs are unavoidable even if X Company buys the part. Production next year is not expected to change. If X Company continues to make the part instead of buying it, it will save_____?
direct materials $ 358,400 direct labor 302,400 overhead 263,200Explanation / Answer
Make Buy Direct materials 358400 Direct labor 302400 Overhead: Variable 207200 Avoidable fixed 21840 Purchase cost 971040 Total 889840 971040 If Company continues to make the part instead of buying it, it will save $81200(971040-889840)
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