Reference no: EM132761003
X Company is considering buying a part next year that they currently make. A company has offered to supply it for $13.66 per unit. This year's production costs for 3,100 units were as follows:
Per-Unit Total
Direct materials $3.85 $11,935
Direct labor 4.67 14,477
Total overhead 8.40 26,040
Total costs $16.92 $52,452
$17,980 of total overhead is fixed. If X Company chooses to buy the part, it will avoid fixed costs of $11,507.
Problem 1. If X Company buys the part next year instead of making it, and production is expected to remain at 3,100 units, it will save
A: $3,633
B: $4,251
C: $4,973
D: $5,819
E: $6,808
F: $7,966
Tries 0/99
Problem 2. If X Company buys the part next year instead of making it, and production next year is expected to be 3,500 units, it will save
A: $2,617
B: $3,795
C: $5,503
D: $7,979
E: $11,569
F: $16,776
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