Problem: Module $6$ Textbook Problem $5$

Learning Objective: $6-3$ Make appropriate outsourcing decisions

Zachary 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 Units $$$$30$

Labor Units $$$$17$

Depreciation on manufacturing equipment$*$

Salary of supervisor of engine production

Rental cost of equipment used to make engines

Allocated portion of corporate$-$level facility$-$sustaining costs

Total cost to make $13,100$ engines

$$393,000$

$222,700$

$26,000$

$85,000$

$21,000$

$[85,000],[$$$832,700]$

The equipment has a book value of $$110,000$ but its market value is zero.

Required

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

b$.$ Determine the maximum price per unit that Zachary would be willing to pay for the engines, if production increased to $17,850$ units.

$($For all requirements, Round your answers to $2$ decimal places.$)$

a$.$ Maximum price per unit

b$.$ Maximum price per unit