*40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1a. 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.)
*40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1a. 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1b. Should the outside supplier's offer be accepted?
O Reject
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 $134,280 per year. Compute the total cost of making and buying the parts.
(Round your Fixed manufacturing overhead per unit rate to 2 decimals.)
Total relevant cost (14,200 units)
Make
O Reject
O Accept
Buy
2b. Should Troy Engines, Ltd., accept the offer to buy the carburetors for $35 per unit?
Transcribed Image Text: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:
Per
Unit Per Year
Direct materials
Direct labor
$9 $127,800
11
156,200
Variable manufacturing overhead
3
42,600
Fixed manufacturing overhead, traceable 9 127,800
Fixed manufacturing overhead, allocated 13 184,600
639,000
Total cost
Total relevant cost (14,200 units)
14,200
Units
$45 $
*40% supervisory salaries, 60% depreciation of special equipment (no resale value).
Required:
1a. 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
Buy
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VIEWStep 4: Compute the total cost of making and buying the parts if segment margin of the new product would be:
VIEWStep 5: Should Troy Engines Ltd. accept the offer to buy the carburettors for $35 per unit:
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