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What purchase price would make x company indifferent

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Question - X Company is considering buying a part next year that it currently makes. A company has offered to supply this part for $1631 per unit. This year's total production costs for 56,000 units were:

Materials $380,800

Direct labor 229,600

Total overhead 336,000

$235,200 of X Company's total overhead costs were variable; $34,272 of X Company's fixed overhead costs can be avoided if it buys the part. If X Company buys the part, there are no alternative uses of the resources that were used for its production. Production next year is expected to increase to 59,150 units.

X Company has an opportunity to negotiate the purchase price with the supplier. What purchase price would make X Company indifferent between making and buying?

Reference no: EM132171085

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