Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The

company has always produced all of the parts for its engines, including the carburetors. An

outside supplier 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, summarized the cost of

producing the carburetor internally as follows:

$*$One$-$third supervisory salaries; two$-$thirds depreciation of special equipment $($no resale

value$).$

Required:

If the company has no alternative use for the facilities being used to produce the

carburetors, what would be the financial advantage $($disadvantage$)$ of buying $16,000$

carburetors from the outside supplier?

Should the outside supplier's offer be accepted?

Suppose if the carburetors were purchased, Troy Engines, Limited, could use the freed

capacity to launch a new product with a segment margin of $$160,000$ per year. Given

this new assumption, what would be the financial advantage $($disadvantage$)$ of buying

$16,000$ carburetors from the outside supplier?

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

accepted?