X Company currently buys a part from a supplier for $13.86 per unit but is...
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Accounting
X Company currently buys a part from a supplier for $13.86 per unit but is considering making the part itself next year. This year, they purchased 3,400 units of this part; next year, they think they will need 3,800 units. Estimated costs to make the part are:
Per-Unit
Total
Direct materials
$3.37
$11,458
Direct labor
4.58
15,572
Variable overhead
3.60
12,240
Fixed overhead
3.70
12,580
Total
$15.25
$51,850
Of the estimated fixed overhead, $6,038 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. X Company currently rents unused factory space for $2,100; it will have to use this space to make the part. If X Company makes the part instead of buying it, it will save?
The answer is not 10762, 6672, 640, or 2856!
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