Question

QuestionsTand 2 rerer to the TOMOWIng nTormationH X Company is considering buying a part in 2020 that it made in 2019. For 2020, the budgeted production cost function is $10.66X + $13,020, where X is the number of units produced. A company has offered to supply this part to X Company for $14.00 per unit. If X Company accepts the offer, it will still incur fixed costs of $6,640, and it will not be able to do anything with the resources that were used to produce the part. In 2019, 3,100 units of the part were produced; in 2020, 3,400 units will be needed. 1. If X Company makes the part in 2020 instead of buying it, it will save Tries 0/3 Submit Answer 2. At what production level would X Company be indifferent between making and buying the part in 2020? Tries 0/3 Submit Answer

Answer 1

1.

Cost of Making	(3400*10.66)+13020 = 49,264	49,264.00
Cost of Buying	(3,400 x 14)+6640	54,240.00
Saving		4,976.00

2. Let X be the number of units

10.66X + 13,020 = 14X + 6,640

3.34X = 6,380

=1,910.18 units