Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all

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Troy Engines Limited Manufactures A Variety Of Engines For Use In Heavy Equipment The Company Has Always Produced All 1 (42.28 KiB) Viewed 61 times

Troy Engines, Limited, 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, Limited, for a cost of 36 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally Per 15,000 Units Per Unit Year Direct materials $ 12 $ 180,000 Direct labor 12 180,000 Variable manufacturing overhead 4. 60,000 Fixed manufacturing overhead, traceable 6 90,000 Fixed manufacturing overhead, allocated 135.000 Total cost 5.43 $ 645,000 *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 15,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to taunch a new product. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be the financial advantage (disadvantage of buying 15,000 carburetors from the outside supplier? 4 Given the new assumption in requirement 3. should the outside supplier's offer be accepted? Complete this questi