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 $17.15 per unit. This year, total costs to produce 57,000 units were: Direct materials Direct labor Overhead $364,800 342,000 245,100 Of the overhead costs, $79,800 were fixed, and $60,648 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 Submit Answer Tries 0/5

Explanation / Answer

Make Amt Buy Amt Direct Material 364800 Cost of Purchase (57000 x 17.15) 977550 Direct Labor 342000 Variable Overhead (245100-79800) 165300 Relevant Fixed Cost (79800-60648) 19152 Total Cost 891252 977550 Savings (977550-891252) 86298

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