Solution-How much it will save, If Z Company makes the part

How much it will save

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Question - Z Company is considering buying a part next year that they currently make. A company has offered to supply it for $13.67 per unit. This year's production costs for 3,000 units were as follows:

Per Unit Total

Direct Materials $3.56 $10,680

Direct Labor 4.78 14,340

Total Overhead 7.10 21,300

Total Costs $15.44 $46,320

$13,500 of total overhead is fixed. If Z Company chooses to buy the part, it will still incur fixed costs of $5,940.

If Z Company makes the part next year instead of buying it, and production is expected to remain at 3,000 units, it will save how much?

If Z Company makes the part next year instead of buying it, and production next year is expected to be 3,300 units, it will save how much?

Reference no: EM132762044

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How much it will save

Reference no: EM132762044

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