Question

the following income statement is for x company and it’s only two products - A and B

Questions 1 and 2 refer to the following information: X Company is considering buying a part in 2020 that it made in 2019, For 2020, the budgeted production cost function is $10.04X + $10,240, where X is the number of units produced. A company has offered to supply this part to X Company for $13.35 per unit. If X Company accepts the offer, it will avoid fixed costs of $4,915, but it will not be able to do anything with the resources that were used to produce the part. In 2019, 3,200 units of the part were produced; in 2020, 3,700 units will be needed. 8 pt 1. If X Company makes the part in 2020 instead of buying it, it will save 1. AO $5,742 BO $6,488 CO 87,332 DO $8,285 EO $9,362 FO $10,579 8 pt 2. At what production level would X Company be indifferent between making and buying the part in 2020? 2. AO 677 BO 792 CO 927 DO 1,085 EO 1,200 FO 1,485 Questions 3 and 4 refer to the following information: X Company is considering buying a part in 2020 that it has been making for the past several years. A company has offered to supply this part for $15.56 per unit, Budgeted production in 2020 is 55,000 units, and budgeted per-unit production costs are: Materials $5.70 Direct labor all variable 4.70 Total overhead 5.40 Total $15.80 $99,000 of X Company's total overhead coats a us total overhead costs are fixed: 874,250 of the $99,000 are unavoidable even if it buys the part. Also, part, it can rent the equipment that was used to make the part to another company for $70,000. if X Company buys the part, it can rent the equipment that was used 8 pt 3. If X Company buys the part instead of making it, it will save $2.933 BO $3,666 CO 84,582 DO 85,728 EO 87,160 FO $8,950 At what production level would X company be indifferent between making and buying the part? AO 53,750 BO 60,737 CO 68,633 DO 77,555 EO 87,637 FO 99,030 4.

ignore the top part lol

Answer 1

1. Relevant costs to buy = 3,700 * $13.35 per unit

= $49,395

Relevant costs to make = ($10.04 * 3,700) + $4,915

= $42,063

Savings = $49,395 - $42,063

= $7,332

The answer is C.

2. Let the production level be P

$10.04 P + $4,915 = $13.35 P

$3.31 P = $4,915

P = 1,485

The answer is F.

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3. Variable overhead = Total overhead - Fixed overhead

= (55,000 * $5.4) - $99,000

= $198,000

Variable overhead cost per unit = $198,000 / 55,000

= $3.6

Avoidable fixed cost = $99,000 - $74,250

= $24,750

Relevant costs to make = (Direct materials per unit + Direct labor per unit + Variable overhead per unit) * Units + Avoidable fixed cost + Opportunity cost of lost rent

= ($5.7 + $4.7 + $3.6) * 55,000 + $24,750 + $70,000

= $864,750

Relevant cost to buy = 55,000 * $15.56

= $855,800

Savings = $864,750 - $855,800

= $8,950

The answer is F.

4. Let the production level be P

(Direct materials per unit + Direct labor per unit + Variable overhead per unit) * Units + Avoidable fixed cost + Opportunity cost of lost rent = $15.56 P

($5.7 + $4.7 + $3.6) * P + $24,750 + $70,000 = $15.56 P

$1.56 P = 94,750

P = 60,737

The answer is B.