Reference no: EM132315480

Question :

X Company currently buys a part from a supplier for $13.99 per unit but is considering making the part itself next year. This year, they purchased 3,200 units of this part. Estimated costs to make the part are:

                               Per-Unit          Total

Direct materials             $3.72         $11,904
Direct labor                    4.09           13,088
Variable overhead            4.10           13,120
Fixed overhead               5.60            17,920
Total                           $17.51        $56,032

Of the estimated fixed overhead, 56,989 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 $2,900; it will have to use this space to make the part.

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?