GOGO golf carts currently produces its own electric motors. Electco has offered
ID: 2504721 • Letter: G
Question
GOGO golf carts currently produces its own electric motors. Electco has offered to sell the electric motors to GOGO at a price of $300 each.
GOGO's current production information for the motors follows:
unit-level material and labor $175
facility-level depreciation of manufacturing equipment $12,00/yr
product-level supervisor's salary $24,000/yr
annual facility-level utilities $1,500
GOGO is currently operating profitibility producing 2,000 engines a year. GOGO maintains worker loyalty by offering employees lifetie employment. Which of the following is true?
a.GOGO should buy the engines for cost saving of $113 per unit.
b. GOGO should continue producing the engines.
c. GOGO has relevant costs of greater than $300 a unit and should buy.
d. GOGO will save $126,000 by producing the engines.
please show why the other answers are incorrect, thanks!
Explanation / Answer
b. GOGO should continue producing the engines.
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