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)$520,000 Labor (20,000 Units × $20) 400,000 Depreciation on manufacturing equipment* 42,000 Salary of supervisor of engine production 85,000 Rental cost of equipment used to make engines 23,000 Allocated portion of corporate-level facility-sustaining costs 80,000 Total cost to make 20,000 engines$1,150,000 *The equipment has a book value of $90,000 but its market value is zero.RequiredDetermine the maximum price per unit that Levesque would be willing to pay for the engines.Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000 units. Exercise 13-11A (Static) Establishing price for an outsourcing decision LO 13-3Levesque Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase theengines 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 productionRental cost of equipment used to make enginesAllocated portion of corporate-level facility-sustaining costsTotal cost to make 20,000 engines*The equipment has a book value of $90,000 but its market value is zero.Required$a. Maximum price per unitb.Maximum price per unit520,000400,00042,00085,00023,00080,000$1,150,000a. 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 24,000units.(For all requirements, Round your answers to 2 decimal places.)

The amount of money that is spent by a company to produce one unit of the product that they sell is referred to as the "cost per unit." There are a few different names for cost per unit, including the cost of goods sold and the cost of sales. When a company's costs of production are lower, they have a better chance of turning a profit.Particulars 20000 Units 24000 Units Cost of material @ 26 520000 624000 Labor @ 20 400000 480000 Depreciation [sunk cost not relevant] 0 0 Salary of supervisor 85000 85000 The rental cost of equipment 23000 23000 The allocated portion of equipment(irrelevant as they would occur in both situations) 0 0 Total Cost 1028000 1212000 Unit 20000 24000 The maximum price per unit 51.40$ 50.50$

Answered: Levesque Company makes and sells lawn…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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)	$	520,000
Labor (20,000 Units × $20)		400,000
Depreciation on manufacturing equipment*		42,000
Salary of supervisor of engine production		85,000
Rental cost of equipment used to make engines		23,000
Allocated portion of corporate-level facility-sustaining costs		80,000
Total cost to make 20,000 engines	$	1,150,000

^*The equipment has a book value of $90,000 but its market value is zero.

Required

Determine the maximum price per unit that Levesque would be willing to pay for the engines.
Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000 units.

Exercise 13-11A (Static) Establishing price for an outsourcing decision LO 13-3
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
*The equipment has a book value of $90,000 but its market value is zero.
Required
$
a. Maximum price per unit
b.
Maximum price per unit
520,000
400,000
42,000
85,000
23,000
80,000
$1,150,000
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.
(For all requirements, Round your answers to 2 decimal places.)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions