Zachary 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 (14,700 units x $19) Labor (14,700 units × $25) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost of equipment used to make engines Allocated portion of corporate-level facility-sustaining costs Total cost to make 14,700 engines $ 279,300 367,500 a. Maximum price per unit b. Maximum price per unit 37,000 84,000 16,000 79,000 $862,800 *The equipment has a book value of $101,000 but its market value is zero. Required a. Determine the maximum price per unit that Zachary would be willing to pay for the engines. b. Determine the maximum price per unit that Zachary would be willing to pay for the engines, if production increased to 18,350 units. Note: For all requirements, round intermediate and final answers to 2 decimal places.
Zachary 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 (14,700 units x $19) Labor (14,700 units × $25) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost of equipment used to make engines Allocated portion of corporate-level facility-sustaining costs Total cost to make 14,700 engines $ 279,300 367,500 a. Maximum price per unit b. Maximum price per unit 37,000 84,000 16,000 79,000 $862,800 *The equipment has a book value of $101,000 but its market value is zero. Required a. Determine the maximum price per unit that Zachary would be willing to pay for the engines. b. Determine the maximum price per unit that Zachary would be willing to pay for the engines, if production increased to 18,350 units. Note: For all requirements, round intermediate and final answers to 2 decimal places.
Cornerstones of Cost Management (Cornerstones Series)
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Transcribed Image Text:Zachary 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 (14,700 units x $19)
Labor (14,700 units × $25)
Depreciation on manufacturing equipment*
Salary of supervisor of engine production
Rental cost of equipment used to make engines
Allocated portion of corporate-level facility-sustaining costs
Total cost to make 14,700 engines
*The equipment has a book value of $101,000 but its market value is zero.
Required
$ 279,300
367,500
37,000
84,000
16,000
79,000
$ 862,800
a. Determine the maximum price per unit that Zachary would be willing to pay for the engines.
b. Determine the maximum price per unit that Zachary would be willing to pay for the engines, if production increased to 18,350 units.
Note: For all requirements, round intermediate and final answers to 2 decimal places.
a. Maximum price per unit
b. Maximum price per unit
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