Question

Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment.Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Requirement 1

Financial Disadvantage = $ (54,000)

Working

Statement of Cost Analysis(18000 Units)
Make Buy Inremental (cost) or benefit
Purchase Price $                        -   $      594,000.00 $      (594,000.00)
Direct Material $      270,000.00 $                        -   $        270,000.00
Direct labor $      162,000.00 $                        -   $        162,000.00
Variable Manufacturing Overheads $        72,000.00 $                        -   $          72,000.00
Fixed Manufacturing Overheads,Avoidable $        36,000.00 $          36,000.00
Opportunity cost $                          -  
Total Relevant Cost $      540,000.00 $      594,000.00 $        (54,000.00)

Requirement 2

No

The offer should be rejected

Requirement 3

Financial advantage= $126,000

Working

Statement of Cost Analysis(18000 Units)
Make Buy Inremental (cost) or benefit
Purchase Price $                        -   $      594,000.00 $      (594,000.00)
Direct Material $      270,000.00 $                        -   $        270,000.00
Direct labor $      162,000.00 $                        -   $        162,000.00
Variable Manufacturing Overheads $        72,000.00 $                        -   $          72,000.00
Fixed Manufacturing Overheads,Avoidable $        36,000.00 $          36,000.00
Opportunity cost $      180,000.00 $        180,000.00
Total Relevant Cost $      720,000.00 $      594,000.00 $        126,000.00

.

Requirement 4

Yes

The offer should be Accepted

.

.

Supervisor salary is avoidable fixed cost. It will be saved if carburator is purchased from outside but depreciation will still be the same , so 2/3rd of fixed cost still occurs when Carburator is purchased. Which means Depreciation is Irrelevant cost and hence excluded from relevant cost calculation

Add a comment
Know the answer?
Add Answer to:
Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for use in heavy equi...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for...

    Exercise 12-3 Make or Buy Decision (LO12-3] 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...

  • Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for...

    Exercise 12-3 Make or Buy Decision (LO12-3] 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 $32 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the...

  • Exercise 12-3 Make or Buy Decision (LO12-3] Troy Engines, Ltd., manufactures a variety of engines for...

    Exercise 12-3 Make or Buy Decision (LO12-3] 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 $37 per unit. To evaluate this offer. Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the...

  • Check my work Exercise 12-3 Make or Buy Decision (LO12-3) Troy Engines, Ltd., manufactures a variety...

    Check my work Exercise 12-3 Make or Buy Decision (LO12-3) 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 $32 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost...

  • 2 Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company...

    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 $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: 5 Joints Unit eBook...

  • Exercise 11-3 Make or Buy Decision (LO11-3) Troy Engines, Ltd., manufactures a variety of engines for...

    Exercise 11-3 Make or Buy Decision (LO11-3) 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 $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the...

  • Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has...

    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 $40 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 18,000 Units Per Unit Per...

  • Exercise 12-3 Make or Buy Decision [LO12-3] Troy Engines, Ltd., manufactures a variety of engines for use in heavy equip...

    Exercise 12-3 Make or Buy Decision [LO12-3] 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...

  • Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has...

    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 $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: Direct materials Direct labor Variable...

  • Troy Engines... Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The...

    Troy Engines... 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: points 16,000 Units...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT