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Q#4-10 points Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts
Q#4-10 points 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 sup- plier 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: Per Unit 15,000 Units per Year Direct materials $14 Direct labor. 10 3 Variable manufacturing overhead. Fixed manufacturing overhead, traceable.. Fixed manufacturing overhead, allocated. $210,000 150,000 45,000 90,000 135,000 6* 9 Total cost ... $42 $630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: Assuming that the company has no alternative use for the facilities that are now being used to produce the carburetors, should the outside supplier's offer be accepted? Show all computations
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