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X Company is considering buying a part next year that they currently make. This year's total production costs for 11,900 units of this part were:
Materials            $42,007
Direct labor             36,414
Variable overhead   52,360
Fixed overhead        66,640

A company has offered to supply this part for $12.99 per unit. If X Company buys the part, $14,661 of the fixed overhead can be avoided, but there is no alternative use of the freed-up resources. Production next year is expected to be the same as this year.

1. The costs of making the part are less than the costs of buying the part by

2. X Company is uncertain what next year's required production will be. At what production level will X Company be indifferent between making and buying the part?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9944864

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