Futura Company purchases the 79,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.80 as shown below: Per Unit Total Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent 6.00 2.20 1.60 $126,400 1.10 86,900 0.60 0.30 23,700 $11.80 Total product cost If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $126,400) to oversee production. However the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period. Depreciation is due to obsolescence rather than wear and tear Required What is the financial advantage (disadvantage) of making the 79,000 starters instead of buying them from an outside supplier? 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: 22,000 Units Per Year Per Unit 15 $330,000 8 176,000 66,000 3 66,000 6132,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 35 $ 770,000 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 22,000 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 $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 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 1Required 2 Required 3 Required 4 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 22,000 carburetors from the outside supplier? Required Required 2 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: 22,000 Units Per Unit Year Per 15 330,000 8 176,000 66,000 3* 66,000 6 132,000 35 770,000 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost 3 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 22,000 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 $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 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 1Required 2 Required 3 Required 4 Should the outside supplier's offer be accepted? OYes ONo KRequired 1 Required 3 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: 22,000 Units Per Per Unit Year Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocatecd Total cost 15 330,000 8 176,000 66,000 3* 66,000 6 132,000 35 770,000 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 22,000 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 $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 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 2Required 3Required 4 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 $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 carburetors from the outside supplier? Required 2 Required 4 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: 22,000 Units Per Per Unit Year Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost $15 330,000 8 176,000 66,000 3* 66,000 6 132,000 35 770,000 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 22,000 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 $220,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 22,000 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 1Required 2 Required 3Required 4 Given the new assumption in requirement 3, should the outside supplier's offer be accepted? Yes No Required 3 Required 4 Han Products manufactures 38,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.10 10.00 2.90 9.00 25.00 An outside supplier has offered to sell 38,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $88,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required What is the financial advantage (disadvantage) of accepting the outside supplier's offer