Fanning Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here.
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Fanning Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here.
| Cost of materials (13,100 Units × $22) | $ | 288,200 | |
| Labor (13,100 Units × $14) | 183,400 | ||
| 38,000 | |||
| Salary of supervisor of engine production | 74,000 | ||
| Rental cost of equipment used to make engines | 24,000 | ||
| Allocated portion of corporate-level facility-sustaining costs | 81,000 | ||
| Total cost to make 13,100 engines | $ | 688,600 | |
*The equipment has a book value of $97,000 but its market value is zero.
Required
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Determine the maximum price per unit that Fanning would be willing to pay for the engines.
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Determine the maximum price per unit that Fanning would be willing to pay for the engines, if production increased to 18,550 units?
(For all requirements, round your intermediate calculations and final answers to 2 decimal places.)
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