X company is considering buying a part next year that they

Reference no: EM13607098

X Company is considering buying a part next year that they currently make. A company has offered to supply this part for $14.71 per unit. X Company would have to inspect each part at a cost of $0.23 per unit. This year's production costs for 11,600 units of this part were: Cost Item Total Per-Unit Materials $45,588 $3.93 Direct labor 55,332 4.77 Variable overhead 49,416 4.26 Fixed overhead 39,440 3.40 Total $189,776 $16.36 If X Company buys the part, $21,298 of the fixed overhead is common and unavoidable; the rest can be avoided. In addition, if X Company buys the part, it can rent out the facilities that it currently uses to make the part and receive $14,320 per year. Estimated production next year is expected to be the same as last year. X Company is concerned that next year's demand may be different than this year's demand. At what level of demand will X Company be indifferent between making and buying?

Reference no: EM13607098

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