Exercise 6-11A (Static) Establishing price for an outsourcing decision LO 6-3 Levesque 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 (20,000 units × $26) Labor (20,000 units × $20) 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 20,000 engines a. Maximum price per unit b. Maximum price per unit $ 520,000 400,000 42,000 85,000 *The equipment has a book value of $90,000 but its market value is zero. Required a. Determine the maximum price per unit that Levesque would be willing to pay for the engines. b. Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000 units. Note: For all requirements, round intermediate and final answers to 2 decimal places. $ 55.08 $ 54.01 23,000 80,000 $ 1,150,000

Exercise 6-11A (Static) Establishing price for an outsourcing decision LO 6-3 Levesque 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 (20,000 units × $26) Labor (20,000 units × $20) 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 20,000 engines a. Maximum price per unit b. Maximum price per unit $ 520,000 400,000 42,000 85,000 *The equipment has a book value of $90,000 but its market value is zero. Required a. Determine the maximum price per unit that Levesque would be willing to pay for the engines. b. Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000 units. Note: For all requirements, round intermediate and final answers to 2 decimal places. $ 55.08 $ 54.01 23,000 80,000 $ 1,150,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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