Question

J and 4 refer to the following information: bo 3.452 E rent between making and buying the part in 2020? 4,591 FO 6,106 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 $16.12 per unit. Budgeted production in 2020 is 53,000 units, and budgeted per-unit production costs are: Materials $5.60 Direct labor all variable) 5.30 Total overhead 5.10 Total $16.00 $58,300 of X Company's total overhead costs are fixed: 845,474 of the $58,300 are unavoidable even if it buys the part. Also, if X Company buys the part, it can rent the equipment that was used to make the part to another company for $75,000 8 pt 3. If X Company buys the part instead of making it, it will save 3. AO $3,314 BO 83,878 CO 84,537 DO $5,308 EO 56,210 8 pts. At what production level would X company be indifferent between making and buying the part? 4. AO 9,014 BO 13,071 CO 18,953 DO 27,482 EO 39,818 FO 57,780 FO 87,266

Answer 1

1
	Per unit		Total 53000 units
	Make	Buy	Make	Buy
Direct materials	5.6		296800
Direct labor	5.3		280900
Variable overhead	4.0		212000
Avoidable fixed overhead			12826
Opportunity cost			75000
Outside Purchase cost		16.42		870260
Total cost	14.90	16.42	877526	870260
Savings in cost =877526-870260=$7,266
Option F $7,266 is correct
2
Increase in production level = 7266/(14.90-16.42)= 4780
Indifferent production level = 53000+4780 = 57,780
Option F 57,780 is correct