Complete this question by entering your answers in the tabs below.Required 1Required 2Required 3Required 4Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, whatwould be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?< Required 1Required 2> Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of thenecessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to TroyEngines, Ltd., for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to itsown cost of producing the carburetor internally:15,000PerUnitsPer YearUnit$ 14$ 210,000150,00045,00090,000135,000$ 630,000Direct materialsDirect labor10Variable manufacturing overheadFixed manufacturing overhead, traceableFixed manufacturing overhead, allocated36*Total cost$ 42*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).Required:1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would bethe financial advantage (disadvantage) of buying 15,000 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. Thesegment margin of the new product would be $150,000 per year. Given this new assumption, what would be the financial advantage(disadvantage) of buying 15,000 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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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 $35 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 Per Year $ 14 $ 210,000 150,000 45,000 90,000 135,000 $ 42 $ 630,000 Unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 3 6* Total cost *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). 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 15,000 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 $150,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier?

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...