U-RIDE, Inc. currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $207 each. Current production information follows: Unit-level material and labor $ 180 Facility-level depreciation of manufacturing equip. $ 5,100 /month Product-level engine production supervisor's salary $ 2,100 /month Annual facility-level utilities $ 15,500 U-RIDE is currently operating profitably producing and selling 2,100 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice U-RIDE should make the engines for cost savings of $27 per unit. Buying the units would increase U-RIDE's cost by $15 per unit. U-RIDE has avoidable costs of greater than $207 per unit and should therefore buy the engines. Buying the units would increase profitability by $42 per unit.
U-RIDE, Inc. currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $207 each. Current production information follows: Unit-level material and labor $ 180 Facility-level depreciation of manufacturing equip. $ 5,100 /month Product-level engine production supervisor's salary $ 2,100 /month Annual facility-level utilities $ 15,500 U-RIDE is currently operating profitably producing and selling 2,100 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice U-RIDE should make the engines for cost savings of $27 per unit. Buying the units would increase U-RIDE's cost by $15 per unit. U-RIDE has avoidable costs of greater than $207 per unit and should therefore buy the engines. Buying the units would increase profitability by $42 per unit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
U-RIDE, Inc. currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $207 each.
Current production information follows:
| Unit-level material and labor | $ | 180 | |
| Facility-level |
$ | 5,100 | /month |
| Product-level engine production supervisor's salary | $ | 2,100 | /month |
| Annual facility-level utilities | $ | 15,500 | |
U-RIDE is currently operating profitably producing and selling 2,100 engines a year using 80% of its manufacturing capacity. Which of the following is true?
Multiple Choice
-
U-RIDE should make the engines for cost savings of $27 per unit.
-
Buying the units would increase U-RIDE's cost by $15 per unit.
-
U-RIDE has avoidable costs of greater than $207 per unit and should therefore buy the engines.
-
Buying the units would increase profitability by $42 per unit.
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