Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always producedall of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one typeof carburetor to Troy Engines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, hasgathered the following information relating to its own cost of producing the carburetor internally: \table[[,, 13,000 Units].[Direct materials, Per Unit,per Year], [Direct labor, $13, $169,000Troy Engines, Limited, 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 outside supplier has offered to sell one type of carburetor to TroyEngines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, has gathered the following information relatingto its own cost of producing the carburetor internally.13,000 UnitsDirect materialsDirect laborVariable manufacturing overheadFixed manufacturing overhead, traceableFixed manufacturing overhead, allocatedTotal costPer Unitper Year$ 13$ 169,0009117,000339,0003*639,00078,000$ 34$ 442,000*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 13,000 carburetors from the outside supplier?2. Should the outside supplier's offer be accepted?3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. Thesegment margin of the new product would be $130,000 per year. Given this new assumption, what would be the financial advantage(disadvantage) of buying 13,000 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 1 Required 2 Required 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 13,000 carburetors from the outside supplier?

Differential revenues and costs (also known as pertinent revenues and costs or incremental revenues…

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. 13,000 Units Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $ 13 per Year $ 169,000 9 117,000 3 3* 39,000 39,000 6 78,000 $ 34 $ 442,000 "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 13,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Limited, could use the freed capacity to launch a new product. The segment margin of the new product would be $130,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier's offer be accepted?

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter13: Nonlinear Optimization Models

Section: Chapter Questions

Problem 8P: Andalus Furniture Company has two manufacturing plants, one at Aynor and another at Spartanburg. The...