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Question - X Company is considering buying a part in 2022 that it currently makes. The budgeted cost function to produce the part is $10.53X + $11,780, where X is the number of units produced. A company has offered to supply this part to X Company for $13.23 per unit. If X Company chooses to buy the part, it will avoid fixed costs of $6,479, and it will be able to sell some of the equipment that it used to make the part for $2,400. In 2021, 3,100 units of the part were produced; in 2022, 3,600 units will be needed.
1. If X Company makes the part in 2022 instead of buying it, it will save?
2. At what production level would X Company be indifferent between making and buying the part in 2022?
Outdoors R Us owns several membership-based campground resorts throughout the Southwest.
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