**Troy Engines, Limited: Internal Production Cost Analysis**Troy Engines, Limited, manufactures various engines for use in heavy equipment, including all necessary engine parts like carburetors. The company is considering an external supplier's offer to provide one type of carburetor at $30 per unit. To make an informed decision, Troy Engines, Limited has compiled the following cost data related to in-house carburetor production:| Cost Component | Per Unit | For 19,000 Units Per Year ||--------------------------------------------|----------|--------------------------|| Direct materials | $12 | $228,000 || Direct labor | $10 | $190,000 || Variable manufacturing overhead | $3 | $57,000 || Fixed manufacturing overhead, traceable | $3* | $57,000 || Fixed manufacturing overhead, allocated | $6 | $114,000 || **Total cost** | **$34** | **$646,000** |*Note: One-third of supervisory salaries and two-thirds of depreciation of special equipment (with no resale value) are included in fixed manufacturing overhead, traceable.**Required Analyses:**1. **Cost Advantage Assessment**: - Determine the financial advantage or disadvantage if the company opts to buy 19,000 carburetors from the external supplier, bearing in mind the current facilities have no alternative application.2. **Supplier Offer Acceptance**: - Evaluate whether the external supplier's proposal should be accepted based on the cost comparison.3. **New Product Launch Scenario**: - If carburetors are outsourced, Troy Engines, Limited can use the available capacity to introduce a new product, potentially earning a segment margin of $190,000 annually. Calculate the financial advantage or disadvantage of purchasing the 19,000 carburetors from the supplier under this new scenario.4. **Supplier Offer Reevaluation**: - Reconsider the acceptance of the supplier's offer with the new assumption regarding potential new product profitability.This analysis aims to guide Troy Engines, Limited in making a strategic decision regarding production optimization and potential profitability enhancements.

Solution: Outsourcing decisions are based on the comparison of inhouse costs of making and…

Answered: roy Engines, Limited, manufactures a…

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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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 15,000 UnitsPer Year Direct materials $ 14 $ 210,000 Direct labor 10 150,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead, traceable 6 * 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $ 42 $ 630,000 *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…
Troy Engines, Limited, 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, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per 12,000 Units Unit Per Year $ 12 $ 144,000 8 96,000 2 24,000 9* 12 108,000 144,000 $ 43 $ 516,000 *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 be the financial advantage (disadvantage) of…
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 $36 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 20,000 Units Per Year Direct materials $ 17 $ 340,000 Direct labor 10 200,000 Variable manufacturing overhead 2 40,000 Fixed manufacturing overhead, traceable 9 * 180,000 Fixed manufacturing overhead, allocated 12 240,000 Total cost $ 50 $ 1,000,000 *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 be the financial advantage (disadvantage) of buying…
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Troy Engines, Limited, 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, Limited, for a cost of $35 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relating to its own cost of producing the carburetor internally: Per Unit 22,000 Units Per Year Direct materials $ 15 $ 330,000 Direct labor 8 176,000 Variable manufacturing overhead 3 66,000 Fixed manufacturing overhead, traceable 3*Footnote asterisk 66,000 Fixed manufacturing overhead, allocated 6 132,000 Total cost $ 35 $ 770,000 *Footnote asteriskOne-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what…
Troy Engines, Limited, 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, Limited, for a cost of $36 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relathng to its own cost of producing the carburetor internally:. Per 20,000 Units Per Unit Year $ 340,000 200,000 40,000 180, 000 240,000 Direct materials $ 17 Direct labor 10 2 Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 9* 12 $ 50 $ 1,000,000 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)…
U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $291 each. Current production information follows: Unit-level material and labor $240 Facility-level depreciation of manufacturing equipment Product-level engine production supervisor's salary $6,300 /month $3,300 /month $21,500 Annual facility-level utilities U-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice O O U-RIDE should make the engines for cost savings of $51 per unit. Buying the units would increase U-RIDE's cost by $39 per unit. U-RIDE has avoidable costs of greater than $291 per unit and should therefore buy the engines. Buying the units would increase profitability by $90 per unit.

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