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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

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 $33 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 Unit 15,600 Units Per Year
Direct materials $ 9 $ 140,400
Direct labor 11 171,600
Variable manufacturing overhead 4 62,400
Fixed manufacturing overhead, traceable 6* 93,600
Fixed manufacturing overhead, allocated 13 202,800
Total cost $ 43 $ 670,800

*40% supervisory salaries; 60% depreciation of special equipment (no resale value).

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