FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $291 each.
Current production information follows:
Unit-level material and labor
$240
Facility-level depreciation of manufacturing equipment
Product-level engine production supervisor's salary
$6,300 /month
$3,300 /month
$21,500
Annual facility-level utilities
U-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true?
Multiple Choice
O
O
U-RIDE should make the engines for cost savings of $51 per unit.
Buying the units would increase U-RIDE's cost by $39 per unit.
U-RIDE has avoidable costs of greater than $291 per unit and should therefore buy the engines.
Buying the units would increase profitability by $90 per unit.
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Transcribed Image Text:U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $291 each. Current production information follows: Unit-level material and labor $240 Facility-level depreciation of manufacturing equipment Product-level engine production supervisor's salary $6,300 /month $3,300 /month $21,500 Annual facility-level utilities U-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice O O U-RIDE should make the engines for cost savings of $51 per unit. Buying the units would increase U-RIDE's cost by $39 per unit. U-RIDE has avoidable costs of greater than $291 per unit and should therefore buy the engines. Buying the units would increase profitability by $90 per unit.
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