Question

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 $16.49 per unit. Budgeted production in 2020 is 50,000 units, and budgeted per-unit production costs are: Materials Direct labor (all variable] Total overhead Total $5.50 6.00 4.90 $16.40 $95,000 of X Company's total overhead costs are fixed; $58,900 of the $95,000 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 $70,000. 3. If X Company buys the part instead of making it, it will save Submit Answer Tries 0/3 4. At what production level would X company be indifferent between making and buying the part?

Answer 1

solutions Given data, Material 5.50 Direct labor Total overheed .4.90 Total $16.40 Маке, щЧ difference purchase price (1649850000) - 8Qy500 Direct material (5.50X 50000). 2-15000 Disect labor (60X50000) 3000w Relevant firektoves head (95000-58900) 36100 varmeble owes heart (soooox49 capiscon) 150000 of fixed overhead opportunity cost o Total cost 1831100 824500 6600 If a company buy the past histead of making in will save $6660 70000

point both the alternative well At Indifference cost the same . let to be the indefference point. fixed elements under mäke alternative are 36100 + 70000 3106100 Ucestable postion of fired Cost = Coooox4.901-95000 50000 units . istal vanable portion of make alternative = 5.5+6+3 = 14:5 Buying alternative is fully variable @ 16:49 perunit. at and defference point 14:5*+ 106100 = 16:49x x = 106100 1.95 T X=53317).