Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company...
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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: 15,900 Units Per Unit Per Year Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost $ 143,100 174,900 47,700 143,100 206,700 $ 715,500 9* 13 S 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 Total relevant cost (15,900 units) 1b. Should the outside supplier's offer be accepted? Reject Accept
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