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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
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 supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $42 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally 14,900 Per Units Unit Per Year Direct materials 13 $193,700 Direct labor 15 223,500 Variable manufacturing overhead 14,900 6* 89,400 Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 17 253,300 52 $774,800 Total cost *40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required la. Assuming that the company has no alternative use for the facilities that are now being used to produce the carburetors, compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.) Buy Make Total relevant cost (14,900 units 1b. Should the outside supplier's offer be accepted? O Accept O Reject
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