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 $35 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 unit15,000 units per year

Direct materials$14$210,000

Direct labor10150,000

Variable manufacturing overhead345,000

Fixed manufacturing overhead, traceable6*90,000

Fixed manufacturing overhead, allocated 9135,000

Total cost$42$630,000

*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, should the outside supplier's offer be accepted? Please show me step by step computation to make me understand if offer should be accepted.

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 $150,000 per year. Should Troy Engines accept the offer to buy the carburetors for $35 per unit? Please show me step by step computation to prove which is better decision.