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At what production level would X Company be indifferent

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Question - X Company is considering buying a part next year that it currently makes. This year's production costs for 3,400 units were:

 

Per-Unit

Total

Direct materials

$2.51

$8,534

Direct labor

3.94

13,396

Variable overhead

3.60

12,240

Fixed overhead

5.30

18,020

Total

$15.35

$52,190

A company has offered to supply this part for $13.94 per unit. $7,749 of X Company's fixed overhead are allocated costs that will occur even if they buy the part. But if X Company buys the part, it can rent out the freed-up resources for $2,500. Production next year is expected to be 3,800 units.

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

Reference no: EM132171101

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