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

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Accounting

Z Company is considering buying a part next year that it currently makes. The budgeted cost function to produce the part is $12.24X + $19,000, where X is the number of units produced. A company has offered to supply this part to Z Company it for $10.12 per unit. If Z Company chooses to buy the part, it will avoid fixed costs of $3,000, and it will be able to lease the resources that will become available from not making the part for $4,700.

1. If Z Company buys the part next year instead of making it, and production is expected to remain at 4,000 units, it will save = ?

2. If Z Company makes the part next year instead of buying it, and production next year is expected to be 5,400 units, it will save = ?

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