Question

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $18.33 per unit. This year, per-unit production costs to produce 18,000 units were:

Direct materials	$8.50
Direct labor	5.00
Overhead	6.10
Total	$19.60

$52,200 of the total overhead costs were fixed. $31,320 of the fixed overhead costs are avoidable if X Company buys the part. If the company buys the part, the resources that are used to make it cannot be used for anything else. Production next year is expected to be 17,250 units.

If X Company buys the part instead of making it, it will save

Answer 1