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X Company is considering buying a part next year that it currently makes. The budgeted...

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Accounting

X Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $10.66X + $13,600, where X is the number of units produced. A company has offered to supply this part to X Comany it for $13.41 per unit. If X Company chooses to buy the part, it will avoid fixed costs of $6,800, and it will be able to lease the resources that will become available from not making the part for $2,800.

1. If X Company buys the part next year instead of making it, and production is expected to remain at 3,400 units, it will save

A: $136 B: $153 C: $173 D: $196 E: $221 F: $250

2. If X Company makes the part next year instead of buying it, and production next year is expected to be 3,900 units, it will save

A: $1,125 B: $1,316 C: $1,540 D: $1,802 E: $2,108 F: $2,467

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