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 Unit			42,000 Units per Year
Direct materials	$	23		$	966,000
Direct labour		28			1,176,000
Variable manufacturing overhead		21			882,000
Fixed manufacturing overhead, traceable		33.0	*		1,386,000
Fixed manufacturing overhead, allocated		27			1,134,000
Total cost	$	132.0		$	5,544,000

*	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.)

2.

Refer to the original data. Assume again that Polaski Company expects to sell only 33,000 Rets through regular channels next year. The Canadian Forces would like to make a one-time-only purchase of 25,000 Rets. The Forces would pay a fixed fee of $3.50 per Ret, and in addition it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Since the Forces would pick up the Rets with its own trucks, there would be no variable selling expenses of any type associated with this order. If Polaski Company accepts this order, by how much will profits be increased or decreased for the year?

3.

Assume that Polaski Company expects to sell only 58,000 Rets through regular channels next year. The Canadian Forces would like to make a one-time-only purchase of 25,000 Rets. The Forces would pay a fixed fee of $3.50 per Ret, and in addition it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Thus, accepting the Canadian Forces order would require giving up regular sales of 25,000 Rets. If the Forces order is accepted, by how much will profits be increased or decreased from what they would be if the 25,000 Rets were sold through regular channels?