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Problem: Module 6 Textbook Problem 5 Learning Objective: 6-3 Make appropriate outsourcing decisions Finch 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 (14,400 Units * $16) Labor (14,400 Units * $25) 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 14,400 engines $ 230,400 360,000 35,000 83,000 25,000 76,000 $ 809,400 *The equipment has a book value of $93,000 but its market value is zero. Required a. Determine the maximum price per unit that Finch would be willing to pay for the engines. b. Determine the maximum price per unit that Finch would be willing to pay for the engines, if production increased to 18,750 units.

Problem: Module 6 Textbook Problem 5 Learning Objective: 6-3 Make appropriate outsourcing decisions Finch 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 (14,400 Units * $16) Labor (14,400 Units * $25) 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 14,400 engines $ 230,400 360,000 35,000 83,000 25,000 76,000 $ 809,400 *The equipment has a book value of $93,000 but its market value is zero. Required a. Determine the maximum price per unit that Finch would be willing to pay for the engines. b. Determine the maximum price per unit that Finch would be willing to pay for the engines, if production increased to 18,750 units.

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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Problem: Module 6 Textbook Problem 5 Learning Objective: 6-3 Make appropriate outsourcing decisions Finch 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 (14,400 Units x $16) Labor (14,400 Units * $25) 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 14,400 engines $ 230,400 360,000 35,000 83,000 25,000 76,000 $ 809,400 *The equipment has a book value of $93,000 but its market value is zero. Required a. Determine the maximum price per unit that Finch would be willing to pay for the engines. b. Determine the maximum price per unit that Finch would be willing to pay for the engines, if production increased to 18,750 units.
Transcribed Image Text:Problem: Module 6 Textbook Problem 5 Learning Objective: 6-3 Make appropriate outsourcing decisions Finch 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 (14,400 Units x $16) Labor (14,400 Units * $25) 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 14,400 engines $ 230,400 360,000 35,000 83,000 25,000 76,000 $ 809,400 *The equipment has a book value of $93,000 but its market value is zero. Required a. Determine the maximum price per unit that Finch would be willing to pay for the engines. b. Determine the maximum price per unit that Finch would be willing to pay for the engines, if production increased to 18,750 units.
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