Check my work mode: This shows what is correc Retu Exercise 13-3 (Algo) Make or Buy Decision [LO13-3] Troy Engines, Ltd., 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 Troy Engines, Ltd. for a cost of $39 per unit . To evaluate this offer. Troy Engines, Ltd.has gathered the following information relating to its own cost of producing the carburetor internally Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 21,080 Per Units Unit Per Year 518 5 378,000 11 231,000 69,000 63,000 6 120.000 5.41 5 361.000 "One third supervisory salaries: two-thirds depreciation of special equipment no resale value) Required: Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage disadvantage) of buying 21000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? Prov 1 o7 Next > | AEK 4 own cost of producing the carburetor internally 21,690 Per Units Unit Per Year Direct materials $ 185 378,000 Direct labor 11 231,000 Variable manufacturing overhead 3 63,000 Fixed manufacturing overhead, traceable 3 63.000 Fixed manufacturing overhead, allocated 6 126,000 Total cost $ 41361,000 One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value) A Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage disadvantage) of buying 21000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltdcould use the freed capacity to launch a new product. The segment margin of the new product would be $210.000 per year Given this new assumption, what would be the financial advantage disadvantage) of buying 21000 carburetors from the outside supplier 4 Given the new assumption in requirement 3 should the outside supplier's offer be accepted? Answer is complete but not entirely correct. PO 17 18 Next > Mc Graw