X Company currently makes a part and is considering buying it from a company that has offered to supply it for $19.03 per unit. This year, per-unit production costs to produce 16,000 units were:

Direct materials $8.10

Direct labor 6.50

Overhead 5.00

Total $19.60

 

$33,600 of the total overhead costs were fixed. $19,488 of the fixed overhead costs are avoidable if X Company buys the part. If the company buys the part, the resources that are used to make it cannot be used for anything else. Production next year is expected to be 15,150 units. If X Company continues to make the part instead of buying it, How much it will save ? Calculate

Answer rating: 100% (QA)

To calculate the savings if X Company continues to make the part instead of buying it we need to com... View the full answer