Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment

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 $31 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable manufacturina overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 14,100 Per Units Unit Per Year $ 9 $126,900 11 155,100 228,200 6 84,600 13 183,300 Total cost $ 41 $578,100 "40% supervisory salaries: 60% depreciation of special 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 (14,100 units) 1b. Should the outside supplier's offer be accepted? Accept Reject

Explanation / Answer

1 Per unit Total Make Buy Make Buy Direct materials 9 126900 Direct labor 11 155100 Variable manufacturing overhead 2 28200 Fixed manufacturing overhead traceable 2.4 33840 Purchase cost 31 437100 Total 344040 437100 Make Buy Total relevant cost 344040 437100 1b Reject 2a Make Buy Total cost 344040 437100 Opportunity cost 102060 Total relevant cost 446100 437100 2b Accept

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.