TroyEngines, 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 16,000 Units Per Year

Direct Materials $9 $144,000

Direct Labor $11 $176,000

Variable Manufacturer Overhead $1 $16,000

Fixed Manufacturer Overhead (traceable) $9* $144,000

Fixed Manufacturer Overhead (allocated) $13 $208,000

Total Cost $43 $688,000

*40% supervisory salaries; 60% depreciation of special equipment (no resale value).

Required:

1a. 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 theparts.(Round your Fixed manufacturing overhead per unit rate to 2 decimals.)

Make Buy

Total relevant cost (16,000 units) ??? ???

2a. 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 $140,400 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.)

Make Buy

Total relevant cost (16,000 units) ??? ???