Exercise 11-3 Make or Buy Decision [L011-3] Troy Engines, Ltd, manufactures a variety of engines...
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Exercise 11-3 Make or Buy Decision [L011-3] 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 $30 per unit. To evaluate this offer, Troy Engines, Ltd, has gathered the following information relating to its own cost of producing the carburetor internally 19,000 Units Per per Year Unit Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 12 $228,000 10 190,000 3 57,000 3 57,000 6 114,000 34 $646,000 One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value)
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