ezto.mheducation.com Onlin Chapter 10 Homework Troy Engines, Ltd., manufactures

Question

ezto.mheducation.com Onlin Chapter 10 Homework Troy Engines, Ltd., manufactures a varlty 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 S43 per unit. To evaluate this ofer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internalily 4,700 Per Units Unit Per Year Direct materials Direct labor Variable manufacturing overhead Fxed manufacturing overhead, traceable Fixed manufacturing overhead, allocated $13 $191,100 15 220,500 2 29,400 6 88,200 17 249,900 Total cost 53 $779,100 40% supervisory salaries, 60% deprecation of special equipment (no resale value). Required a. Assuming that the company has no altemative 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.) Total relevant cost (14,700 unts) 1b. Should the outside supplier's offe be accepted? Reject Accept 2a Suppose that if the carburetiors were purchased, Troy Engines, Ltd, could use the freed capacity to aunch a new product. The segment margin of the new product would be $163,820 per year. Compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit

Explanation / Answer

Requirement 1a) Make Buy Total relevent cost(14700 units) 476280 632100 Working Notes Cost of Making =14700*32.4 = 476280 per unit Direct materials 13 Direct labor 15 Variable manufacturing overhead 2 Fixed Manufacturing overhead-Traceable* 2.4 Total cost of making 32.4 *Note : Since Special equipment has no resale value, depreciation on the same can not be avoided. The remaining cost of tracebele fixed costs only i.e supervisory salary is taken into consideration for cost of making. Cost of Buying =14700*43 = 632100 Requirement 1b) No, Outside supplier offer should not be accepted, as cost of buying is more than cost of making. Requirement 2a) Make Buy Total relevent costs 476280 468280 Working Notes Cost of Buying =14700*43 = 632100 Less : segment margin of new product 163820 Net relevent cost of buying 468280 The cost of making as calculated in Requirement 1a) 476280 Requirement 2b) Yes, now Troy company should accept the offer to buy, as cost of buying is less than cost of making.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.