X Company currently makes a part and is considering buying it from a company has
ID: 2574646 • Letter: X
Question
X Company currently makes a part and is considering buying it from a company has offered to supply it for $19.04 per unit. This year, per-unit production costs to produce 50,000 units were:
$220,000 of the total overhead costs were variable; $25,900 of the fixed overhead costs can be avoided if X Company buys the part. In addition, the resources that were used for production can be rented to another company for $70,000. Production next year is expected to increase to 53,800 units.
3. If X Company continues to make the part instead of buying it, it will save _____
4. X Company is uncertain about next year's production level. At what production level will the company be indifferent between making and buying the part?
Direct materials $6.90 Direct labor 5.90 Overhead 5.80 Total $18.60Explanation / 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= 53800*6.90 371,220.00 371,220.00 Direct Labour = 53800*5.9 317,420.00 317,420.00 Overhead = 220000/50000*53800 + 25900 262,620.00 262,620.00 Purchase cost = 53800*19.04 1,024,352.00 (1,024,352.00) Oppurtunity cost of renting (70,000.00) 70,000.00 Total relevant cost 951,260.00 954,352.00 (3,092.00) If X Company continues to make the part instead of buying it, it will save 3092 Paticulars Make Buy Fixed costs 25,900.00 (70,000.00) Variable cost per unit Make = 6.9 + 5.90 +4.4 17.20 19.04 Indifference point = (25000-(-70000)/(19.04-17.20) Indifference point = 95900/1.84 Indifference point = 52,119.57 Units
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.