X Company currently buys a part from a supplier for $13.24 per unit but is...
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Accounting
X Company currently buys a part from a supplier for $13.24 per unit but is considering making the part itself next year. This year, they purchased 3,200 units of this part; next year, they will need 3,600 units. Estimated costs to make the part next year are:
Per-Unit
Total
Direct materials
$2.83
$9,056
Direct labor
3.27
10,464
Variable overhead
4.30
13,760
Fixed overhead
6.00
19,200
Total
$16.40
$52,480
Of the estimated fixed overhead, $10,176 would be additional fixed overhead costs; the remainder would be common costs allocated to the part. X Company currently receives $2,200 a year by renting unused factory space, but it will have to use this space to make the part.
If X Company continues to buy the part instead of making it, it will save
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