Question: X Company is considering buying a part next year that they currently make. A company has offered to supply this part for $16.32 per unit. This year's production costs per unit for 52,000 units were:
| Direct materials |
$7.00 |
| Direct labor |
4.90 |
| Total overhead |
4.50 |
| Total |
$16.40 |
Of the total overhead costs, $83,200 were fixed, and $56,576 of these fixed overhead costs are unavoidable. If X Company buys the part, the resources that were used for production can be rented to another company for $70,000. Production next year is expected to increase to 55,950 units.
1) If X Company buys the part instead of making it, it will save ____?
2) Assume that 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?