The following are the budgeted profit functions for X Company's two products, A and B, for...

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The following are the budgeted profit functions for X Company's two products, A and B, for next year: Product A: P = .44 (R) - $26,030 Product B: P = .50 (R) - $56,720 where R is revenue. Budgeted revenue for the two products are $92,000 and $93,000, respectively. Unavoidable fixed costs for the two products are $9,631 and $25,524, respectively. The company is considering dropping Product B because it appears to be losing money. If it does, the resulting freed-up resources can be used to increase revenue from sales of Product A by $36,600, but that will require $3,000 of additional fixed costs. If X Company drops B and increases revenue from A, firm profits will change by 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 $26.37 per unit. This year, production was 11,500 units; next year, production is expected to be 14,950 units. Per-unit production costs for the part this year were: Materials $10.69 Direct labor 9.39 Variable 5.67 overhead Fixed overhead 3.13 Total $28.88 $27,716 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 $4,000. X Company is uncertain about its 14,950 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year? The following are the budgeted profit functions for X Company's two products, A and B, for next year: Product A: P = .44 (R) - $26,030 Product B: P = .50 (R) - $56,720 where R is revenue. Budgeted revenue for the two products are $92,000 and $93,000, respectively. Unavoidable fixed costs for the two products are $9,631 and $25,524, respectively. The company is considering dropping Product B because it appears to be losing money. If it does, the resulting freed-up resources can be used to increase revenue from sales of Product A by $36,600, but that will require $3,000 of additional fixed costs. If X Company drops B and increases revenue from A, firm profits will change by 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 $26.37 per unit. This year, production was 11,500 units; next year, production is expected to be 14,950 units. Per-unit production costs for the part this year were: Materials $10.69 Direct labor 9.39 Variable 5.67 overhead Fixed overhead 3.13 Total $28.88 $27,716 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 $4,000. X Company is uncertain about its 14,950 unit production estimate for next year. At what level of production would X Company be indifferent between making and buying the part next year?

Answer rating: 100% (QA)

Answer Solution iIf X company drops B and increases revenue f... View the full answer