Solution 1:
Relevant cost of buying 4000 parts = 4000*$14.73 = $58,920
Relevant cost to make = Variable manufacturing costs + Avoidable fixed cost
= (4000*$11.32) + ($18,900- $10,395)
= $53,785
Net savings if company make the part = $58,920 - $53,785 = $5,135
Hence option A is correct.
Solution 2:
Let at X units, company will be indifferent in making and buying the part.
Now
$14.73 X = $11.32 X + $8,505
X = $8,505 / $3.41
= 2494 units
Hence option F is correct.
I refer to the following information: X Company is considering buying a part in 2020 that...
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