Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all
Posted: Wed Mar 09, 2022 8:18 am
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 $35 per unit. To evaluate this
offer, Troy Engines, Limited, has gathered the following
information relating to its own cost of producing the carburetor
internally:
*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 17,000
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 launch a new product. The
segment margin of the new product would be $170,000 per year. Given
this new assumption, what would be the financial advantage
(disadvantage) of buying 17,000 carburetors from the outside
supplier?
4. Given the new assumption in requirement 3, should the outside
supplier’s offer be accepted?
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 17,000
carburetors from the outside supplier?
Suppose that if the carburetors were purchased, Troy Engines,
Limited, could use the freed capacity to launch a new product. The
segment margin of the new product would be $170,000 per year. Given
this new assumption, what would be the financial advantage
(disadvantage) of buying 17,000 carburetors from the outside
supplier?
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 $35 per unit. To evaluate this
offer, Troy Engines, Limited, has gathered the following
information relating to its own cost of producing the carburetor
internally:
*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 17,000
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 launch a new product. The
segment margin of the new product would be $170,000 per year. Given
this new assumption, what would be the financial advantage
(disadvantage) of buying 17,000 carburetors from the outside
supplier?
4. Given the new assumption in requirement 3, should the outside
supplier’s offer be accepted?
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 17,000
carburetors from the outside supplier?
Suppose that if the carburetors were purchased, Troy Engines,
Limited, could use the freed capacity to launch a new product. The
segment margin of the new product would be $170,000 per year. Given
this new assumption, what would be the financial advantage
(disadvantage) of buying 17,000 carburetors from the outside
supplier?