Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 11, Problem 3E
Make or Buy Decision
Troy Engines, Ltd, manufactures a variety of engines for use in have 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:
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 (d advantage) of busing 15,000 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. The segment margin of the new product would be $150,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier’
4. Given the new assumption in requirement 3, should the outside suppliers offer be accepted?
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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 $19 per unit. To evaluate this offer, Troy Engines, Ltd., 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
15,100
Per
Units
Unit
Per Year
$ 5 $ 75,500
7
105,700
2
30,200
6" 90,600
135,900
437,900
$29 $
*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…
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 $32 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
Per
Unit
$14
136,000
3
51,000
3+
Fixed manufacturing overhead, traceable
Fixed manufacturing overhead, allocated
Total cost
51,000
102,000
6
$ 34
$578,000
*One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
8
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 17,000 carburetors from 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 $36 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 20,000 Units Per
Unit
Year
$ 13
11
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead, traceable
Fixed manufacturing overhead, allocated
Total cost
$.43
"One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
4
6⁰
Complete this question by entering your answers in the tabs below.
Required 11 Required 21 Required 3 Required 4
9
$ 260,000
220,000
80,000
Required:
1. Assuming the company has no alternative use for the facilities that are now being…
Chapter 11 Solutions
Introduction To Managerial Accounting
Ch. 11 - What is a relevant cost?Ch. 11 - Define the following terms: incremental cost,...Ch. 11 - Are variable costs always relevant costs? Explain.Ch. 11 - Prob. 4QCh. 11 - “Variable costs and differential costs mean the...Ch. 11 - Prob. 6QCh. 11 - Prentice Company is considering dropping one of...Ch. 11 - Prob. 8QCh. 11 - What is the danger in allocating common fixed...Ch. 11 - Prob. 10Q
Ch. 11 - Give at least four examples of possible...Ch. 11 - Prob. 12QCh. 11 - Define the following terms: joint products, joint...Ch. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - The Excel worksheet form that appears below is to...Ch. 11 - The Excel worksheet form that appears below is to...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 9F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Identifying Relevant Costs Syahn, AB, is a Swedish...Ch. 11 - Prob. 2ECh. 11 - Make or Buy Decision Troy Engines, Ltd,...Ch. 11 - Special Order Decision Imperial Jewelers...Ch. 11 - Volume Trade-off Decisions Outdoor Luggage, Inc.,...Ch. 11 - Prob. 6ECh. 11 - Sell or Process Further Decisions Dorsey Company...Ch. 11 - Volume Trade-Off Decisions Barlow Company...Ch. 11 - Special Order Decision Delta Company produces a...Ch. 11 - Make or Buy Decision Futura Company purchases the...Ch. 11 - Make or Buy Decision Han Products manufactures...Ch. 11 - Volume Trade-Off Decisions Benoit Company produces...Ch. 11 - Prob. 13ECh. 11 - Identification of Relevant Costs Kristen Lu...Ch. 11 - Prob. 15ECh. 11 - Identification of Relevant Costs Bill has just...Ch. 11 - Prob. 17ECh. 11 - Prob. 18PCh. 11 - Dropping or Retaining a Segment Jackson Count...Ch. 11 - Sell or Process Further Decision (Prepared from a...Ch. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Make or Buy Decision Silven Industries, which...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Close or Retain a Store Superior Markets. Inc.,...Ch. 11 - Sell or Process Further Decisions Come-Clean...Ch. 11 - Make or Buy Decisions “In my opinion, we ought to...
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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 $39 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 21,000 Units per Year Direct materials $ 18 $ 378,000 Direct labor 11 231,000 Variable manufacturing overhead 3 63,000 Fixed manufacturing overhead, traceable 3* 63,000 Fixed manufacturing overhead, allocated 6 126,000 Total cost $ 41 $ 861,000 *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…arrow_forwardTroy 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 oútside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $32 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 17,000 Units Per per Year Unit Direct materials Direct labor $ 14 $ 238,000 8 136,000 Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 3 51,000 3* 51,000 6. 102,000 Total 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 be the financial advantage (disadvantage) of buying…arrow_forwardTroy 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 $32 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 17,000 Unitsper Year Direct materials $ 14 $ 238,000 Direct labor 8 136,000 Variable manufacturing overhead 3 51,000 Fixed manufacturing overhead, traceable 3 * 51,000 Fixed manufacturing overhead, allocated 6 102,000 Total 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…arrow_forward
- 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: \table[[,, 13,000 Units ].[Direct materials, Per Unit,per Year], [Direct labor, $13, $169,000 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…arrow_forwardTroy 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 $39 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 21,000 UnitsPer Year Direct materials $ 18 $ 378,000 Direct labor 11 231,000 Variable manufacturing overhead 3 63,000 Fixed manufacturing overhead, traceable 3 * 63,000 Fixed manufacturing overhead, allocated 6 126,000 Total cost $ 41 $ 861,000 *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…arrow_forwardTroy 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 $34 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 Unit Per Year ৪16 304, 000 Direct materials Direct labor 10 190,000 Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 38,000 171,000 228,000 2 12 Total cont $ 49 ও 931, 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 19,000…arrow_forward
- 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…arrow_forwardTroy 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 $33 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 18,000 UnitsPer Year Direct materials $ 15 $ 270,000 Direct labor 9 162,000 Variable manufacturing overhead 4 72,000 Fixed manufacturing overhead, traceable 6 * 108,000 Fixed manufacturing overhead, allocated 9 162,000 Total cost $ 43 $ 774,000 *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…arrow_forwardTroy 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 produce and sell one type of carburetor to Troy Engines Ltd. for a cost of $53 per unit. To evaluate this offer, Troy Engines Ltd. has gathered the following information relating to its own cost of producing the carburetor internally: 1. Direct materials cost $32 per unit. 2. Troy Engines pays its direct labour employees $20o per hour; each carburetor requires 30 minutes of labour time. 3. Variable manufacturing overhead is allocated at 30% of direct labour cost. 4. Total fixed manufacturing cost amounts to $15 per unit, of which 60% is allocated common cost and the remaining 40% covers depreciation of special equipment and supervisory salaries. The special equipment has no resale value. Supervisory personnel will be transferred to a different department if the…arrow_forward
- 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: 15,000 Units Per Per Unit Year Direct materials $ 12 $ 180,000 180,000 60,000 90,000 135,000 $ 43 $ 645,000 Direct labor 12 Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated 4 9. 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) of buying 15,000…arrow_forwardTroy 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 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 15,000 Units Per Unit per Year $ 12 $ 180,000 12 180,000 4 60,000 6* 90,000 9 135,000 $ 43 $ 645,000 *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…arrow_forwardTroy 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…arrow_forward
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