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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 $34 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 14,900 Units per year Direct materials $9 $134,100 Direct labor 11 163,900 Variable manufacturing overhead 2 29,800 Fixed manufacturing overhead, traceable 9* 134,100 Fixed manufacturing overhead, allocated 13 193,700 Total cost $44 $655,600 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Requirement 1: What will be the total relevant cost of 14,900 units, if they are manufactured internally? Requirement 2: 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 $63,000 per year. What will be the total relevant cost of 14,900 units, if they are manufactured internally

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