Question

Nunes Questions 1 and 2 refer to the following information: Company is considering buying a part in 2020 that it made in 2019. For 2020, the budgeted production cost function is $12.09X $15,040, where X is the mumber of units produced. A company has offered to supply this part to X Company for $15.55 per unit. If X Company accepts the offer, it will avoid fixed costs of $8,122, 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, 3,600 units will be needed 8 pt. If X Company makes the part in 2020 instead of buying it, it will save 1. AO $1,775 BO $2,219 CO $2.774 DO $3,468 EO $4,334 FO $5,418 18 pt 2: At what production level would X Company be indifferent between making and buying the part in 2020? 2. AO 1,253 BO 1,466 CO 1715 DO 2,006 EO 2,347 FO 2,746 Questions 3 and 4 refer to the following information:

Answer 1

1
	Per unit		Total 3600 units
	Make	Buy	Make	Buy
Variable Costs to make	12.09		43524
Avoidable fixed overhead			8122
Outside Purchase cost		15.55		55980
Total cost	12.09	15.55	51646	55980
Savings in cost = 51646-55980 = 4334
Option E $4,334 is correct
2
Decrease in production level = 4334/(15.55-12.09=1253
Indifferent production level = 3600-1253= 2347
Option E 2,347 is correct