Exercise 11-3 (Algo) Make or Buy Decision (LO11-3] Check my work Troy Engines, Limited, 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. Limited for a cost of $35 per unit to evaluate this offer. Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally ed 22.000 units Per Unit pee Year Direct materials $15 $ 130,000 Direct labor 176,000 Variable manufacturing overhead 66,00 Hafacturing overhead, traceable 66,00 Fanufacturing overhead, allocated 132.000 Total cott 520.000 One third supervisory Salaries: two-thirds depreciation of special equipment (no resale value) Required: 1. Assuming the company has no alternative use for the facimes that are now being used to produce the carburetors, what would be the financial advantage (disadvantage of buying 22.000 Carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines Limited could use the freed capacity to launch a new product. The segment margin of the new product would be 5220 000 per year Given this new assumption what would be the financial advantage (disadvantage of buying 22,000 carburetors from the outside supplier 4. Given the new assumption in requirement should the outud supersoner be accepted Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 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 22,000 carburetors from the outside supplier? Remed Required 2 > Check or (disadvantage) of buying 22.000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Complete this question by entering your answers in the tobs below. Required 1 Required 2 Required 3 Required Should the outside supplier's offer be accepted? OYes ONO es Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product The segment margin of the new product would be $220,000 per year. Given this new assumption, what would be the finandal advantage (disadvantage) of buying 22,000 carburetors from the outside supplier? Inces (disadvantage) of buying 22,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Oros ON
