Exercise 13-3 (Static) 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 $35 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 15, eee Per Units Unit Per Year $ 14 $ 210,000 10 150,000 3 45,000 90,000 135,eee $ 42 $ 630, eee "One-third supervisory salaries; 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 15.000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150.000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 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 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 15,000 carburetors from the outside supplier? Required 1 Required 2 > Exercise 13-3 (Static) Make or Buy Decision [LO13-3] Troy Engines, Ltd., 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 Engines, Ltd., for a cost of $35 per unit. To evaluate this offer. Troy Engines, Ltd., has gathered the following Information relating to its own cost of producing the carburetor Internally: 15,eee Per Units Unit Per Year Direct materials $ 14 $ 210,eee Direct labor 10 150,000 Variable manufacturing overhead 45,000 Fixed manufacturing overhead, traceable 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $ 42 $ 638,eee *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 15,000 carburetors from the outside supplier? 2 Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150.000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 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 Should the outside supplier's offer be accepted? Yes No Exercise 13-3 (Static) 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 $35 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 15,eee Per Units Unit Per Year $ 14 $ 210, eee 10 150,000 3 45,eee 98,eee 9 135, eee $ 42 $ 638,888 One-third supervisory salaries; 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 15,000 carburetors from the outside supplier? 2 Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150.000 per year. Given this new assumption, what would be the financial advantage (disadvantage of buying 15,000 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 Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier? Exercise 13-3 (Static) 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 $35 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 15, eee Per Units Unit Per Year $ 14 $ 210, eee 10 150,eee 3 45,000 90,000 9 135,000 $ 42 $ 630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15.000 carburetors from the outside supplier? 2 Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150.000 per year. Given this new assumption, what would be the financial advantage (disadvantage of buying 15.000 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 Give the new assumption in requirement 3, should the outside supplier's offer be accepted? OYes NO