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Thornton 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 (13,400 Units x $24) Labor (13,400 Units x $16) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost Allocated portion of corporate-level facility-sustaining costs $ 321,600 214,400 38,000 83,000 29,000 equipment used to make engines 90,000 $ 776,000 Total cost to make 13,400 engines *The equipment has a book value of $108,000 but its market value is zero. Required a. Determine the maximum price per unit that Thornton would be willing to pay for the engines. b. Determine the maximum price per unit that Thornton would be willing to pay for the engines, if production increased to 18,150 units? (For all requirements, round your intermediate calculations and final answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit

Thornton 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 (13,400 Units x $24) Labor (13,400 Units x $16) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost Allocated portion of corporate-level facility-sustaining costs $ 321,600 214,400 38,000 83,000 29,000 equipment used to make engines 90,000 $ 776,000 Total cost to make 13,400 engines *The equipment has a book value of $108,000 but its market value is zero. Required a. Determine the maximum price per unit that Thornton would be willing to pay for the engines. b. Determine the maximum price per unit that Thornton would be willing to pay for the engines, if production increased to 18,150 units? (For all requirements, round your intermediate calculations and final answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit

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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Thornton 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 (13,400 Units x $24) Labor (13,400 Units x $16) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost Allocated portion of corporate-level facility-sustaining costs $ 321,600 214,400 38,000 83,000 29,000 equipment used to make engines 90,000 $ 776,000 Total cost to make 13,400 engines *The equipment has a book value of $108,000 but its market value is zero. Required a. Determine the maximum price per unit that Thornton would be willing to pay for the engines. b. Determine the maximum price per unit that Thornton would be willing to pay for the engines, if production increased to 18,150 units? (For all requirements, round your intermediate calculations and final answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit
Transcribed Image Text:Thornton 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 (13,400 Units x $24) Labor (13,400 Units x $16) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost Allocated portion of corporate-level facility-sustaining costs $ 321,600 214,400 38,000 83,000 29,000 equipment used to make engines 90,000 $ 776,000 Total cost to make 13,400 engines *The equipment has a book value of $108,000 but its market value is zero. Required a. Determine the maximum price per unit that Thornton would be willing to pay for the engines. b. Determine the maximum price per unit that Thornton would be willing to pay for the engines, if production increased to 18,150 units? (For all requirements, round your intermediate calculations and final answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit
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