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Troy EngInes, LImIted, manufactures a varlety of engines for use In heavy equipment. The company has always produced all of the necessary parts for Its
Troy EngInes, LImIted, 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, LImIted, for a cost of \$35 per unit. To evaluate this offer, Troy EngInes, LImIted, has gathered the following Information relating to Its own cost of producing the carburetor Internally: Required: 1. Assuming the company has no alternative use for the facilitles that are now belng used to produce the carburetors, what would be the financlal advantage (dlsadvantage) of buylng 16,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that If the carburetors were purchased, Troy EngInes, LImlted, could use the freed capaclty to launch a new product. The segment margin of the new product would be $160,000 per year. Glven this new assumption, what would be the financlal advantage (disadvantage) of buylng 16,000 carburetors from the outslde 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. 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 16,000 carburetors from the outside supplier
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