Question

Questions 1 and 2 refer to the following information: X Company is considering buying a part in 2020 considering buying a part in 2020 that it made in 2019. For 2020, the budgeted production cost function is 9.63X + 820,400, where X is the member of units produced. A company has offered to supp $12.86 per unit. If X Company accepts the offer, it of units produced. A company has offered to supply this part to X Company for Per uit. 11 X Company accepts the offer it will avoid fixed costs of $10.812. but it will not be able to do anything with the resources that were used to produce the nart. In 2019, 3.400 units of the part were produced; in 9. 3.400 units of the part were produced; in 2020, 3,800 units will be needed 8 pt 1. If X Company makes the part in 2020 instead of buying it, it will save 1. AO $827 BO $1,099 CO 81.462 DO 81,941 EO 82,686 FO 83,440 8 pt 2. At what production level would X Company be indifferent between making and buying the part in 2020? 2. AO 2,517 BO 3,347 CO 4,452 DO 5,921 EO 7,875 FO 10,474

Answer 1

1. Relevant costs to buy = 3,800 * $12.86 per unit

= $48,868

Relevant costs to make = ($9.63 * 3,800) + $10,812

= $47,406

Savings = $48,868 - $47,406

= $1,462

The answer is C.

2. Let the production level be P

$9.63 P + $10,812 = $12.86 P

$3.23 P = $10,812

P = 3,347

The answer is B.