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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) $ 520,000 400,000 42,000 85,000 23,000 80,000 $ 1,150,000 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. 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.

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) $ 520,000 400,000 42,000 85,000 23,000 80,000 $ 1,150,000 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. 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.

FINANCIAL ACCOUNTING
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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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 $ 520,000 400,000 42,000 $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. 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 85,000 23,000 80,000 $ 1,150,000 units. Note: For all requirements, round intermediate and final answers to 2 decimal places.
Transcribed Image Text: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 $ 520,000 400,000 42,000 $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. 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 85,000 23,000 80,000 $ 1,150,000 units. Note: For all requirements, round intermediate and final answers to 2 decimal places.
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