03 PM /201R ?https //newconnect mheducation com.flow/Connect html Help Sove & Ex
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03 PM /201R ?https //newconnect mheducation com.flow/Connect html Help Sove & Exit s 3 (5 pt) Saved Check my w 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, inclucding all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd, for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd, has gathered the following information relating to its own cost of producing the carburetor internaly izect sterial Dirent abor Variable nanutacturing cmsthead ixed aatact.uring overboad, traceabl Fixed nanufacturing averhead, allocate Total coat SIT 340,000 L 220,000 6U,000 f 220, 000 6 40 800,000 ird supervisory salaries, two-thirds depreciation of special equipment (no resaie value) Roquired: 1, Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the tinancial aovantage (disadvantagel of buying 20,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Ltd, could use the freed capacity to launch a new product. The segment margin of the new product would be $200,000 per year, Given this new assumption, what would be financiail acvantage (disadvantage) of buying 20,000 carburators from the outside supplier? 4 Given the new assumption in requirement 3, should the outside suppliers offer be accepted? Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 Assuming the company has no alternative use for the facilities that are now being used to p would be the financial advantage (cisadvantage) of buying 20,000 carburetors from the outside supplier? roduce the carburetors, what nancia acrantage Required 2 >Explanation / Answer
1) Calculate financial advantage (disadvantage)
Financial disadvantage = 640000-700000 = -60000
2) Reject
3) Calculate financial advantage (disadvantage)
Financial advantage = 840000-700000 = 140000
4) Accept
Make Buy Direct material 340000 Direct labour 220000 Variable overhead 60000 Fixed overhead 20000 Purchase cost 700000 Total relevant cost 640000 700000Related Questions
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