rhead ad, traceable ad, allocated Per Unit $ 18 9 2 9* 12 $ 50 18,000 Units Per Year $ 324,000 162,000 36,000 162,000 216,000 $ 900,000 two-thirds depreciation of special equipment (no resale value). ative use for the facilities being used to produce the carburetors, what would be the financial buying 18,000 carburetors from the outside supplier? offer he accented?
rhead ad, traceable ad, allocated Per Unit $ 18 9 2 9* 12 $ 50 18,000 Units Per Year $ 324,000 162,000 36,000 162,000 216,000 $ 900,000 two-thirds depreciation of special equipment (no resale value). ative use for the facilities being used to produce the carburetors, what would be the financial buying 18,000 carburetors from the outside supplier? offer he accented?
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...
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Question
![Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the
parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a
cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as
follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead, traceable
Fixed manufacturing overhead, allocated
Total cost
Per
Unit
$ 18
9
2
9*
12
$ 50
18,000 Units
Per Year
$ 324,000
162,000
36,000
162,000
216,000
$ 900,000
*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial
advantage (disadvantage) of buying 18,000 carburetors from the outside supplier?
2. Should the outside supplier's offer be accepted?
3. Suppose if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product with a
segment margin of $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying
18,000 carburetors from the outside supplier?
4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa28b04db-9905-44cf-814b-5c5134bbdce4%2F5a9359bb-b60f-46fc-b77d-55aee3c1bd5e%2Ffes2h8o_processed.png&w=3840&q=75)
Transcribed Image Text:Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the
parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a
cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as
follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead, traceable
Fixed manufacturing overhead, allocated
Total cost
Per
Unit
$ 18
9
2
9*
12
$ 50
18,000 Units
Per Year
$ 324,000
162,000
36,000
162,000
216,000
$ 900,000
*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
Required:
1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial
advantage (disadvantage) of buying 18,000 carburetors from the outside supplier?
2. Should the outside supplier's offer be accepted?
3. Suppose if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product with a
segment margin of $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying
18,000 carburetors from the outside supplier?
4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted?
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