Exercise 11-3 (Algo) Make or Buy Decision [LO11-3] 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 suppliet has offered to sell one type of carburetor to Tray Engines, Limited, for a cost of $36 per unit . To evaluate this offer. Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally 20,000 Units per Year Direct materials $340,000 Direct labor 200,000 Variable manufacturing overhead 10. Fixed manufacturing overhead, traceable 10,000 Fixed manufacturing overhead, allocated 240,000 Total cost $ 1.000.000 One-third supervisory salarles, two-thirds depreciation of special equipment (no resale value) 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 20,000 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 $200,000 per year Given this new assumption, what would be the financial advantage [disadvantage) of buying 20,000 carburetors from the outside supplier? 4 Given the new assumption in requirement 3. should the outside supplier's offer be accepted? Por unit $ 17 10 2 9 12 550 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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 20,000 carburetors from the outside supplier? Required 2 > 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 20,000 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 produa. The segment margin of the new product would be $200.000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 20.000 carburetors from the outside supplier 4. Given the new assumption in requirement should the outud suppliers offer be accepted? Complete this question by entering your answers in the tabs below Required Required 2 Required Required Suppose that if the carburators were purchased, Troy Engine Omited, could use the freed capacity to launch a new product The segment margin of the new product would be $200,000 per year alven this new assumption, what would be the finandal advantage (disadvantage) of buying 20,000 carburators from the outside supplier?
