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i safari File Edit View History Bookmarks Window Help 21% D Wed 15 Nov 11:53:02 AM Q Optimal Resume at GEOAGIA INSTITUTE OF Watch Transformers 3 Full Movie Free | 123 BuzzPort Connect Chegg Study | Guided Solutions and Stud.. Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. rt Return to question 2 Exercise 12-3 Make or Buy Decision (LO12-3] 4331 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 $37 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producingthe carburetor internally: paper 23,000 Units Per Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed anufacturing overhead, allocated Total cost Unit Per Year $16 368,000 207,000 92,000 6 138,000 207,000 44 $1,012,000 One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). ge 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 23,000 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 $230,000 per year. Given this new assumption, what would be financial advantage (disadvantage) of buying 23,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? litz Answer is not complete. 88 10 BO.JPG Mc Prev 2016 Next>

Explanation / Answer

1a Per unit Total Make Buy Make Buy Direct materials 16 368000 Direct labour 9 207000 Variable manufacturing overhead 4 92000 Fixed manufacturing overhead,traceable 2 46000 Purchase cost 37 851000 Total differential cost(per unit) 31 37 713000 851000 Financial disadvantage = 138000(851000-713000) 2 No, it should not be accepted 3 Make Buy Total cost 713000 851000 Opportunity cost 230000 Total differential cost 943000 851000 Financial advantage = 92000(943000-851000) 4 Yes, it should be accepted

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