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Firefox File Edit View History Bookmarks Tools Window Help ?CSUF Portal . Home × TTANum studert services-Di × O ezto.mheducation.com/hm.tp Your Firefox is critically out of date. An update is recuired to stay secure Update Now 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 $23 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally 15,400 Per Units Unit Per Year $ 5 S 77,000 7107,800 3 46,200 9 138,600 9 138,600 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable manufacturing overhead, allocated Total cost $ 33 $508.200 40% supervisory salaries, 60% depreciation of specal 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 the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.) Make Buy Total relevant cost (15,400 units) 1b. Should the outside supplier's offer be accepted? Accept Reject se 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 $85,760 per year. Compute the total cost of making and buying the parts. (Round your Fixed manuf rate to 2 decimals.) acturing overhead per unit

Explanation / Answer

1a) Differential analysis :

1b) Reject the order.

2a) Differential analysis :

2b) Accept the order.

Make Buy Direct material 77000 Direct labour 107800 Variable manufacturing overhead 46200 Fixed manufacturing overhead (138600*40%) 55440 Purchase cost (15400*23) 354200 Total 286440 354200

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