X Company currently buys a part from a supplier for $12.07 per unit but is consi

Question

X Company currently buys a part from a supplier for $12.07 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 3,600 units. Estimated costs to make the part are: Direct materials Direct labor Variable overhead Fixed overhead Total Per-Unit $3.80 3.28 2.60 4.30 Total $11,780 10,168 8,060 13,330 $13.98 $43,338 Of the estimated fixed overhead, $6,132 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unusecd factory space for $3,000; 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

Explanation / Answer

Per unit Total 3600 units Make Buy Make Buy Direct materials 3.8 13680 Direct labor 3.28 11808 Variable overhead 2.6 9360 Fixed overhead 7198 Opportunity cost 3000 Purchase cost 12.07 43452 Total cost 45046 43452 If X Company continues to buy the part instead of making it, it will save $1594(45046-43452)

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.