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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

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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 engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Lid 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 19.000 Per Units Unit Per Year Direct materials 5.16 304,000 Direct labor 10 190,000 Variable manufacturing overhead 2 38,000 Fixed manufacturing overhead, traceable 9 171.000 Fixed nanufacturing overhead, allocated 12 228,000 Total cost $ 49 $ 931,000 SH *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 19.000 carburetors from the outside supplier? 2. Should the outside suppliers offer be accepted? 3 Suppose that if the carburetors were purchased, Troy Engines. Lid, could use the freed capacity to launch a new product The Kegment margin of the new product would be $190,000 per year Given this new assumption what would be the financial advantage (disadvantage) of buying 19.000 carburetors from the outside supplier? 4. Given the new assumption in tequirement should the outside supplier's offer be accepted

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