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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

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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 12,eee units Per Unit per Year Direct materials 5 12 $ 144, cee Direct labor 8 96, eee Variable manufacturing overhead 24.ee Fixed manufacturing overhead, traceable Ies, een Fixed manufacturing overhead, allocated 12 144, eee Total cost $43 $ 516,00 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 12,000 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 $120,000 per year Given this new assumption, what would be the financial advantage (disadvantage) of buying 12,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted

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