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 produce and sell one type of carburetor to Troy Engines Ltd. for a cost of $110.5 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 43,500 Units Unit per Year Direct materials $ 23 $1,000,500 Direct labour 29 1,261,500 Variable manufacturing overhead 22 957.000 Fixed manufacturing overhead, traceable 34.5* 1.500,750 Fixed manufacturing overhead, allocated 28 1,218,000 Total cost $136.5 $5,937,750 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1-a. Compute the total differential cost per unit for producing and buying the product. (Round your answers to 1 decimal places.) Make Buy Total differential cost (per unit) 1-b. Should the outside supplier's offer be accepted? Yes 2-a. 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 $1,105,000 per year. Compute the total differential cost in producing and buying the product when the segment margin is foregone on a potential new product line. Make Buy Total differential cost 2-b. Should Troy Engines Ltd. accept the offer to buy the carburetors for $110.5 per unit? Yes O No References eBook & Resources