Lunn Inc. 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 (15,000 units × $24) ............$360,000

Labor (15,000 units × $26) .................390,000

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 15,000 engines ...............$980,000

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

Required

a. Determine the maximum price per unit that Lunn would be willing to pay for the engines.

b. Would the price computed in Requirement a change if production increased to 18,750 units?

Support your answer with appropriate computations.