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 produce and sell one type of carburetor to Troy Engines Ltd. for a cost of $99.0 per unit. To evaluate this offer, Troy Engines Ltd. has gathered the following information relating to its own cost of producing the carburetor internally: PerUnit39,000 Unitsper Year Direct materials$22 $858,000 Direct labour 26 1,014,000 Variable manufacturing overhead 19 741,000 Fixed manufacturing overhead, traceable 30.0* 1,170,000 Fixed manufacturing overhead, allocated 25 975,000 Total cost$122.0 $4,758,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required:1-a.Compute the total differential cost per unit for producing and buying the product. (Round your answers to 1 decimal places.)

Answered: Troy Engines Ltd. manufactures a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...

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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 produce and sell one type of carburetor to Troy Engines Ltd. for a cost of $99.0 per unit. To evaluate this offer, Troy Engines Ltd. has gathered the following information relating to its own cost of producing the carburetor internally:

	Per Unit	39,000 Units per Year
Direct materials	$	22		$	858,000
Direct labour		26			1,014,000
Variable manufacturing overhead		19			741,000
Fixed manufacturing overhead, traceable		30.0	*		1,170,000
Fixed manufacturing overhead, allocated		25			975,000

Total cost	$	122.0		$	4,758,000

*	One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).

Required:

1-a.

Compute the total differential cost per unit for producing and buying the product. (Round your answers to 1 decimal places.)

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