Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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 of ered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $24 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 Per Units Unit Per Year Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated S 5 $ 72,000 7 100,800 4 57,600 9 129,600 9 129,600 Total cost s 34 $489,600 40% supervisory salaries, 60% depreciation of special equpment (no resale value). Required: 1a. Assuming that the company has no alternative use for the faclities that are now being used to produce the carburetors, compute the total cost of making and buying the parts, (Round your F manufacturing overhead per unit rate to 2 decimals.) Total relevant cost (14.400 units) 1b. Should the outside supplier's offer be accepted? Accept Reject 2a. Suppose that if the carburetors were purchased, Troy Engines Lid, could use the freed capacity to launch a new product. The segment margin of the new product would be $73.360 per year Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit Total relevant cost ( 1 n Shouls Teoy Engines LtS,accopt the offer to buy the carburetors for $24 per unir? lype here to search

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions