X Company no longer has the space necessary to produce all of its parts. A company...
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X Company no longer has the space necessary to produce all of its parts. A company has offered to supply one of X Company's parts for $26.70 per unit. This year, production was 14,000 units; next year, production is expected to be 18,000 units. Per-unit production costs for the part this year were: Materials $11.22 Direct labor 9.13 Variable overhead 5.71 Fixed overhead 3.60 Total $29.66 $40,320 of X Company's fixed overhead cannot be avoided even if it buys the part. In addition, if X Company buys the part, it will be able to rent some equipment that will no longer be needed, to a company for $3,750. X Company is uncertain about its 18,000 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year? X Company no longer has the space necessary to produce all of its parts. A company has offered to supply one of X Company's parts for $26.70 per unit. This year, production was 14,000 units; next year, production is expected to be 18,000 units. Per-unit production costs for the part this year were: Materials $11.22 Direct labor 9.13 Variable overhead 5.71 Fixed overhead 3.60 Total $29.66 $40,320 of X Company's fixed overhead cannot be avoided even if it buys the part. In addition, if X Company buys the part, it will be able to rent some equipment that will no longer be needed, to a company for $3,750. X Company is uncertain about its 18,000 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year?
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Particulars Amount Material 1122 Direct labor 913 Variable ov... View the full answer
Related Book For
Managing Supply Chain and Operations An Integrative Approach
ISBN: 978-0132832403
1st edition
Authors: Thomas Foster, Scott E. Sampson, Cynthia Wallin, Scott W Webb
Posted Date:
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