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, Lid for a cost of $35 per unit To evaluate this offer. Troy Engines Ltd. has gathered the following information relating to its owri cost of producing the carburetor internally Direct uiteriale Direct labor Variable manufacturing overhead Fixed aufacturing overhead. traceable Fixed Annuacturing wethead. located Total cost 16.000 Per Unit Unit Ter You 114 $ 310,000 10 150.000 3 45.000 08 90.000 9 106,000 342 $ 650.000 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 15,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased. Troy Engines, Ltd. could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside 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. Required Required 2 Required Required 4 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 15,000 carburetors from the outside supplier? Required 1 Required 2 Required 3 Required 4 Should the outside supplier's offer be accepted? Yes ONO Required 1 Required 2 Required 3 Required 4 Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier? Required 1 Required 2 Required 3 Required 4 Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Yes No
