HW Ch10 eztomheducation.con. a Search HW Ch10 instructions I help Question 1 (of
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HW Ch10 eztomheducation.con. a Search HW Ch10 instructions I help Question 1 (of 5) Save & Exit!! Submit! value 20.00 points 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 $36 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 15,000 Per Units Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Unit Per Year S 9 $135,000 11 165,000 4 60,000 9 135,000 13 195,000 Total cost S 46 $690,000 40% supervisory salaries: 60% depreciation of special equipment (no resale value). Required: a. 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 Bu Total relevant cost 15,000 units) S 540,000 b. Should the outside supplier's offer be accepted? Reject O Accept 2a. 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 $141,000 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.) Make Buy Tatal relevant cost (15,000 units) 2b. Should Troy Engines, Ltd., accept the offer to buy the carburetors for $36 per unit? O Reject Accept Desktop » ^ -2 2:57 PM (x 12/1/20175Explanation / Answer
1a) Calculate relevant cost :
1b) Troy engines Ltd., Should reject the offer.
2a) Calculate relevant cost :
2b) Troy engines Ltd., Should accept the offer.
Make Buy Direct material 135000 Direct labour 165000 Variable manufacturing overhead 60000 Fixed manufacturing overhead (135000*40%) 54000 Purchase cost (15000*36) 540000 Total cost 414000 540000Related Questions
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