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Campbell Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a
Campbell 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 (14,500 Units x $25) Labor (14,500 Units x $16) $362,500 232,000 Depreciation on manufacturing equipment* 34,000 Salary of supervisor of engine production 84,000 Rental cost of equipment used to make engines 13,000 Allocated portion of corporate-level facility-sustaining costs 78,000 $803,500 Total cost to make 14,500 engines *The equipment has a book value of $98,000 but its market value is zero. Required a. Determine the maximum price per unit that Campbell would be willing to pay for the engines. b. Determine the maximum price per unit that Campbell would be willing to pay for the engines, if production increased to 18,100 units. (For all requirements, Round your answers to 2 decimal places.) a. Maximum price per unit b. Maximum price per unit
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