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A company manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines,

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A company manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to the company for a cost of $36 per unit. To evaluate this offer, the compan has gathered the following information relating to its own cost of producing the carburetor internally: 20,000 Per Unita Unit Per Year $ 17 $ 340,000 10 200.000 2 40,000 9 180,000 12 240,000 $ 50 $1,000,000 Direct materials Direct labor Variable manufacturing overhead Tixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). If the carburetors were purchased, the company could use the freed capacity to launch a new product. The segment margin of the new product would be $200,000 per year. What would be the financial advantage or disadvantage of buying 20,000 carburetors from the outside supplier? If disadvantage, place the number is parentheses (eg.. (50000)). 0

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