M Comprehensive C X e Solved: Variable x e A 92060 N E XV /X 0/1) DAVE EAST F- O
ID: 2599553 • Letter: M
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M Comprehensive C X e Solved: Variable x e A 92060 N E XV /X 0/1) DAVE EAST F- Office365 R Luis messsged A G Google X Microsoft Office . x .(1] YouTube x X tpx Troy Engines, Ltd, manufactures a vanery of angin6s for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the cerouretors. An outside supplier has offered lo sell one type of carbrel to Tray Engines, Ltd, for a cost of $35 per unit To avaluate ths ofer, Troy Engne5, Ltd., has gathered the tolowing niomation relabng to ts own cost of producing the carburetor intemalty 14 800 Per Units Direct materias Cirect labar Variable manufactuning overhead Fixed manufacturing ovemead, traceable Fixnd manufachuaring overhead, allocated Unit Per Year S 9 S131,400 11 160,800 3 43,800 131,400 13 189,800 Total cost S 45 S657,000 "40% supervisory salanes; 60% depreciation of special equipment no resale value). Required: 1n Anumngthat the company has no aternawc use for the facities that are n , bcing used to produce the carouretors, compute the total cost of making and lbuying the parts. (Round your Fixed manufacturing overhead per unit rate to 2 decimals.) Tctal relevant cost 14600 units 1b. Snould the outside supplers otfer lbe accepted0? Accept Reject 2a. Suppose tha: if the carburetons were purchased Troy Engnes, Ltd., could use the freed capacty to aunch a rew product. The segment margin of he new product would be S141,840 per year. Compute the total cost of maang and burying tha parts (Round your Fixed manufacturing owerhead per unit rate to 2 decimals. Tctal relevant cost (14,600 units Activate Windows Go to PC settings to activate Windows 2b. Snould Troy Engines, Ltd, accept the offer to buy the carburetors for $35 per unt? Accept O Reject 1234 AM 12/16/2017Explanation / Answer
Requirement 1b:
Since the relevant cost in case of purchase option is more than that of producing, it is advisable to produce.
Hence the outside supplier's offer should be rejected
Correct Option is Reject.
Requirement 2b:
Since the total relevant cost in case of purchasing option is less, it is advisable to purhcase.
Hence the outside supplier's option should be accepted.
Correct Option is Accept.
Requiremnet 1a: Total Relevant cost if no alternative for freed facilities: Make Buy Direct Material 131400 Direct Labor 160600 Variable Manufactured Overhead 43800 Fixed Manufacturing Overehead, Traceable 131400 78840 Fixed Manufacturing Overhead, allocated 189800 189800 Cost of purchase 511000 Total Relevant Cost 657000 779640Related Questions
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