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 $$30$ per unit. To evaluate this

offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the

carburetor internally:

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

Required:

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 $19,000$ carburetors from the

outside supplier?

Should the outside supplier's offer be accepted?

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 $$190,000$ per year. Given this new

assumption, what would be the financial advantage $($disadvantage$)$ of buying $19,000$ carburetors from the

outside supplier?

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