Exercise $13-3($Algo$)$ Make or Buy Decision $[$L$013-3]$

Troy EngInes, Limited, manufactures a varlety 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

Englnes, Limited, for a cost of $$30$ per unit. To evaluate thls offer, Troy EngInes, Limited, has gathered the following Information relating

to its own cost of producing the carburetor internally:

$*$One$-$third supervisory salarles; two$-$thirds depreclation of special equipment $($no resale value$).$

Requlred:

Assuming the company has no alternative use for the facilitles that are now belng used to produce the carburetors, what would be

the financlal advantage $($disadvantage$)$ of buying $19,000$ carburetors from the outside supplier?

Should the outside supplier's offer be accepted?

Suppose that If the carburetors were purchased, Troy Englnes, Limlted, could use the freed capacity to launch a new product. The

segment margin of the new product would be $$190,000$ per year. Glven this new assumption, what would be the financlal advantage

$($disadvantage$)$ of buyling $19,000$ carburetors from the outside supplier?

Given the new assumption in requirement $3,$ should the outside supplier's offer be accepted?