Question

Chapter 13 Homework 6 Help Save & Exit Check Franklin 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. Doints Cost of materials (13,200 Units X $23) Labor (13,200 Units x 523) Depreciation on facturing equipment Salary of supervisor of engine production Rental cost of equipment used to make engines Allocated portion of corporate-level facility-sustaining conta Total cost to make 13,200 engines $ 30), 600 303,600 32,000 83,000 11.000 77.000 $ 810,200 Skipped eBook *The equipment has a book value of $105,000 but its market value is zero. References Required a. Determine the maximum price per unit that Franklin would be willing to pay for the engines b. Determine the maximum price per unit that Franklin would be willing to pay for the engines, if production increased to 17,900 units? (For all requirements, round your intermediate calculations and final answers to 2 decimal places.) < Prev 3 of 5 Next >

Answer 1

1
	Total Variable and avoidable fixed cost
	Cost of Materials	303600
	Labor	303600
	Depreciation	0	(Unavoidable cost)
	Salary of Supervisor	83000
	Rental cost of equipment	11000
	Allocated Cost	0	(Unavoidable cost)
	Total cost	701200
	Cost per unit	53.12
	Maximum price franklin will be willing to pay is 52.12
2
	@17900 Units Production
	Cost of Materials	411700
	Labor	411700
	Depreciation	0
	Salary of Supervisor	83000
	Rental cost of equipment	11000
	Allocated Cost	0
	Total cost	917400
	Cost per unit	51.25
	Maximum price franklin will be willing to pay is 51.25