X Company currently makes a part and is considering buying it next year from a c

Question

X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $15.43 per unit. This year, total costs to produce 60,000 units were:

Of the overhead costs, $78,000 were fixed, and $60,840 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 ___?

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Make Buy Difference Direct Materials         378,000.00         378,000.00 Direct Labour         276,000.00         276,000.00 Overhead = 246000 - 78000 + (78000 - 60840)         185,160.00         185,160.00 Purchase cost = 60000*15.43         925,800.00       (925,800.00) Total relevant cost         839,160.00         925,800.00         (86,640.00) If X Company continues to make the part instead of buying it, it will save 86,640

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