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 $33 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:

	Per Unit				18,000 Units Per Year
Direct materials	$	15		$	270,000
Direct labor		9			162,000
Variable manufacturing overhead		4			72,000
Fixed manufacturing overhead, traceable		6	*		108,000
Fixed manufacturing overhead, allocated		9			162,000
Total cost	$	43		$	774,000

*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 18,000 carburetors from the outside supplier?

2. Should the outside suppliers 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 $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier?

4. Given the new assumption in requirement 3, should the outside suppliers offer be accepted?

Andretti Company has a single product called a Dak. The company normally produces and sells 85,000 Daks each year at a selling price of $58 per unit. The companys unit costs at this level of activity are given below:

Direct materials	$	8.50
Direct labor		12.00
Variable manufacturing overhead		3.30
Fixed manufacturing overhead		4.00	($340,000 total)
Variable selling expenses		2.70
Fixed selling expenses		3.50	($297,500 total)
Total cost per unit	$	34.00

A number of questions relating to the production and sale of Daks follow. Each question is independent.

An outside manufacturer has offered to produce 85,000 Daks and ship them directly to Andrettis customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andrettis avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the companys products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data:

Product	Demand Next year (units)	Selling Price per Unit		Direct Materials		Direct Labor
Debbie	67,000	$	30.00	$	4.40	$	4.40
Trish	59,000	$	5.40	$	1.30	$	0.80
Sarah	52,000	$	44.00	$	8.99	$	6.80
Mike	36,000	$	16.00	$	3.70	$	5.20
Sewing kit	342,000	$	9.70	$	4.90	$	0.40

The following additional information is available: Assuming that direct labor-hours is the companys constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? (Do not round intermediate calculations. Round your final answer to a whole dollar amount.)