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 $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally 13.000 Unita Per Per Unit Year Direct materials $ 13 $169,000 Direct labor 9 117.000 Variable manufacturing overhead 3 39,000 Fixed manufacturing overhead, traceable 3. 39,000 Yixed manufacturing overhead, allocated 6 78,000 Total cost 634 S 442,000 *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, what would be the financial advantage disadvantage) of buying 13.000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. 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 $130.000 per year Given this new assumption, what would be the financial advantage (disadvantage) of buying 13.000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3. should the outside supplier's offer be accepted? Comnlete this nunctionnantaina ........ 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 $30 per unit. To evaluate this offer. Troy Engines, Ltd. has gathered the following information relating to its own cost of producing the carburetor internally Dirt materiais Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total COST 13,000 Unata per Per Unit Yes 13 169.000 117.000 3 39,000 3 39,000 78,000 34 442,000 "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, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3 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 $130,000 per year. Given this new assumption what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 4. Given the new assumption in requirement should the outside supplier's offer be accepted
