Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedTroy 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 $107.0 per unit. To evaluate this offer, Troy Engines Ltd. has gathered the following information relating to its own cost of producing the carburetor internally:

Problem 9-4 Determining Whether to Make or Buy (LO1 - CC4) 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 $107.0 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 42,000 Units Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Unit per Year $ 23 $ 966,000 28 1,176,000 21 882,000 33.0* 1,386,000 Fixed manufacturing overhead, allocated 27 1,134,000 $132.0 $5,544,000 traceable Total cost 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 Total differential cost (per unit 1-b.Should the outside supplier's offer be accepted? Yes No 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 $1,030,000 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 $107.0 per unit? Yes No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bookkeeping And Accounting For Beginners

Authors: D.K. Livingston

1st Edition

1686248598, 978-1686248597

More Books

Students also viewed these Accounting questions

Question

Why do you think this problem has occurred?

Answered: 1 week ago