Adams 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 (14,200 Units x $27) Labor (14,200 Units × $14) 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 14,200 engines $ 383,400 198,800 22,000 74,000 15,000 86,000 $ 779,200 *The equipment has a book value of $105,000 but its market value is zero. Required a. Determine the maximum price per unit that Adams would be willing to pay for the engines. b. Determine the maximum price per unit that Adams would be willing to pay for the engines, if production increased to 18,300 units. (For all requirements, Round your answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit
Adams 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 (14,200 Units x $27) Labor (14,200 Units × $14) 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 14,200 engines $ 383,400 198,800 22,000 74,000 15,000 86,000 $ 779,200 *The equipment has a book value of $105,000 but its market value is zero. Required a. Determine the maximum price per unit that Adams would be willing to pay for the engines. b. Determine the maximum price per unit that Adams would be willing to pay for the engines, if production increased to 18,300 units. (For all requirements, Round your answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1PB: Classify costs Cromwell Furniture Company manufactures sofas for distribution to several major...
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