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U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the
U-RIDE, Incorporated 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 $214 each. Current production Information follows: Unit- level material and labor $ 185 Facility- level depreciation of manufacturing $ 5, 200/month equipment Product-level engine production supervisor's $ 2, 200/month salary Annual facility- level utilities $ 16, 000 Buying the engines will free up manufacturing capacity that could be used to make a new economy line golf cart that would produce an additional $48,400 profit per year. U- RIDE is currently operating profitably producing and selling 2,200 engines annually. Based on this Information, which of the following is true? Multiple Choice O The $48,400 is not relevant because it is an estimate. O Buying the units would increase U-RIDE's cost by $17 per unit. X U-RIDE has avoidable costs of less than $214 per unit and should therefore buy engines. O The cost of buying the engines is $5 per unit less than the relevant cost of making the units
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