TroyEngines, 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 $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:

	Per Unit	15,100 Units Per Year
Direct materials	$	9			$	135,900
Direct labor		11				166,100
Variable manufacturing overhead		2				30,200
Fixed manufacturing overhead, traceable		9*				135,900
Fixed manufacturing overhead, allocated		13				196,300
Total cost	$	44			$	664,400

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

Required:

1a. Assuming that the company has no alternative use for the facilities that are now being used to produce the carburetors, compute the total cost of making and buying theparts.(Round your Fixed manufacturing overhead per unit rate to 2 decimals.)

1b. Should the outside suppliers offer be accepted?

Reject

Accept

2a. 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$137,840 per year. Compute the total cost of making and buying theparts.(Round your Fixed manufacturing overhead per unit rate to 2 decimals.)

2b. Should Troy Engines, Ltd., accept the offer to buy the carburetors for $34 per unit?

Accept

Reject

Pl answer all 3 questions in the attachment .

The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

	Total		Dirt Bikes		Mountain Bikes		Racing Bikes
Sales	$	927,000			$	266,000			$	403,000			$	258,000
Variable manufacturing and selling expenses		464,000				112,000				200,000				152,000
Contribution margin		463,000				154,000				203,000				106,000
Fixed expenses:
Advertising, traceable		69,000				8,600				40,300				20,100
Depreciation of special equipment		43,500				20,300				7,200				16,000
Salaries of product-line managers		115,200				40,600				38,900				35,700
Allocated common fixed expenses*		185,400				53,200				80,600				51,600
Total fixed expenses		413,100				122,700				167,000				123,400
Net operating income (loss)	$	49,900			$	31,300			$	36,000			$	(17,400)

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

1a. What is the impact on net operating income by discontinuing racing bikes?(Decreases should be indicated by a minus sign.)

1b. Should production and sale of the racing bikes be discontinued?

Yes

No

2a. Prepare a segmented income statement.

2b. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines.

Yes

No