Question

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $20.23 per unit. This year, per-unit production costs to produce 17,000 units were:

Direct materials	$8.50
Direct labor	5.70
Overhead	6.70
Total	$20.90

$37,400 of the total overhead costs were fixed. $15,334 of the fixed overhead costs are unavoidable 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 16,000 units.

If X Company continues to make the part instead of buying it, it will save

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.