X Company is considering buying a part next year that they currently make. This year's total...
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X Company is considering buying a part next year that they currently make. This year's total production costs for 84,000 units of this part were: Materials $583,800 Direct labor 412,440 Variable overhead 259,560 Fixed overhead 139,440 Total $1,395,240 A company has offered to supply this part for $15.41 per unit. If X Company buys the part, $57,170 of the total fixed overhead is avoidable, but there is no alternative use of the resources that will become idle. Production next year is expected to increase by 3,650 units. If X Company buys the part instead of continuing to make it, it will save 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 $25.74 per unit. This year, production was 11,000 units; next year, production is expected to be 14,650 units. Total production costs for the part this year were: Materials $122,210 Direct labor 89,650 Variable overhead 64,020 Fixed overhead 23,760 Total $299,640 $21,384 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 $2,000. X Company is uncertain about its 14,650 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 is considering buying a part next year that they currently make. This year's total production costs for 84,000 units of this part were: Materials $583,800 Direct labor 412,440 Variable overhead 259,560 Fixed overhead 139,440 Total $1,395,240 A company has offered to supply this part for $15.41 per unit. If X Company buys the part, $57,170 of the total fixed overhead is avoidable, but there is no alternative use of the resources that will become idle. Production next year is expected to increase by 3,650 units. If X Company buys the part instead of continuing to make it, it will save 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 $25.74 per unit. This year, production was 11,000 units; next year, production is expected to be 14,650 units. Total production costs for the part this year were: Materials $122,210 Direct labor 89,650 Variable overhead 64,020 Fixed overhead 23,760 Total $299,640 $21,384 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 $2,000. X Company is uncertain about its 14,650 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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Answer rating: 100% (QA)
1 84000 Units 3650 Units 87650 units 583800 695 491 309 Material ... View the full answer
Related Book For
Taxes and Business Strategy A Planning Approach
ISBN: 9780132752671
5th edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon
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