Master Business with Fun Quizzes & Brain Teasers!

U-RIDE, Inc. 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 $235 each. Current production information follows: Unit-level material and labor $200 Facility-level depreciation of manufacturing equip. $5,500 /month Product-level engine production supervisor's salary $2,500 /month Annual facility-level utilities $17,500 U-RIDE is currently operating profitably producing and selling 2,000 engines a year using 90% of its manufacturing capacity. Which of the following is true?a. U-RIDE should make the engines for cost savings of $25 per unit.b. Buying the units would increase U-RIDE's cost by $13 per unit.c. U-RIDE has avoidable costs of greater than $200 per unit and should therefore buy the engines.d. Buying the units would increase profitability by $38 per unit.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 $65,000 profit per year. U-RIDE is currently operating profitably producing and selling 2,500 engines annually. Based on this information, which of the following is true?a. The $36,000 is not relevant because it is an estimate.b. Buying the units would increase U-RIDE's cost by $13 per unit.c. U-RIDE has avoidable costs of less than $200 per unit and should therefore buy engines.d. The cost of buying the engines is $5 per unit less than the relevant cost of making the units.