Question

X Company is considering buying a part in 2020 that it made in 2019. For 2020, the budgeted production cost function is $10.79X + $20,400, where X is the number of units produced. A company has offered to supply this part to X Company for $13.95 per unit. If X Company accepts the offer, it will avoid fixed costs of $11,220, but it will not be able to do anything with the resources that were used to produce the part. In 2019, 3,400 units of the part were produced; in 2020, 3,700 units will be needed.

1. If X Company makes the part in 2020 instead of buying it, it will save

Tries 0/3

2. At what production level would X Company be indifferent between making and buying the part in 2020?

Answer 1

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sowtion o computation of Pant in 2020 saving, of X Company makes the Instead of buying . رہ کر ہم cost of buying = 3,700x 13.95 - $51,615 cost of making = $10.7983, 700 + 11,220 - 51,143 Savings = $51,6156) 51, 143 = $472 @ computation of Production level Let the production level y $10.79x + 11.920 - 13.95% 3.16X = 11.220 X = 11,220 3.16 = 3,550 units