Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment
ID: 2501863 • Letter: T
Question
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 $44 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:
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 the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.)
Make: Buy:
Total Relevant Costs (14,000 units) ???? ????
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 $166,400 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.)
Total Relevant costs (14,000 units):
Make:??? Buy:???
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 $44 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:
Explanation / Answer
1a) computation of the total cost of making and buying the parts
b) Total cost of making would be 467600
Total cost of buying would be = 616000 - 166400 = $449600.
Particulars Making Buying Per unit Total$ Per Unit Total$ Direct materials 13 182000 Direct labour 15 210000 Variable overhead 3 42000 Fixed mfg. overhead traceable 6*0.4=2.4 33600 Total Cost 33.4 467600 44 616000Related Questions
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