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 oútside supplier has offered to sell one type of carburetor to TroyEngines, Ltd., for a cost of $32 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to itsown cost of producing the carburetor internally:17,000UnitsPerperYearUnitDirect materialsDirect labor$ 14 $ 238,0008136,000Variable manufacturing overheadFixed manufacturing overhead, traceableFixed manufacturing overhead, allocated351,0003*51,0006.102,000Total cost$ 34 $ 578,000*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 17,000 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 $170,000 per year. Given this new assumption, what would be the financial advantage(disadvantage) of buying 17,000 carburetors from the outside supplier?4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted? 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 17,000 carburetors from the outside supplier?Required 1Required 2>

Traceable fixed manufacturing overheads are relevant in decision making, whereas, allocated fixed…

Answered: Per Unit $ 14 Direct materials

Business

Accounting

Per Unit $ 14 Direct materials

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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