Question

I need number 3 please!

X Company currently buys a part from a supplier for $12.41 per unit but is considering making the part itself next year. This year, they purchased 3,100 units of this part. Estimated costs to make the part are:

		Per-Unit	Total
Direct materials		$2.38	$7,378
Direct labor		3.94	12,214
Variable overhead		4.00	12,400
Fixed overhead		5.00	15,500
Total		$15.32	$47,492

Of the estimated fixed overhead, $5,735 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space to a tenant for $2,600; it will have to use this space to make the part.

2. If X Company will need 3,100 units again next year and continues to buy the part instead of making it, it will save $5,886

3. X Company is somewhat uncertain how many units of the part it will need next year. How many units would make the company indifferent between continuing to buy the part and making it?

Answer 1

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