ACC208CH11HW - Assignment Print View 8/9/10 10:26 AM...

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1. aw ard: 5 points 2. aw ard: 5 points 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: Per Unit 15,000 Units per Year Direct materials $14 $210,000 Direct labor 10 150,000 Variable manufacturing overhead 3 45,000 Fixed manufacturing overhead, traceable 6* 90,000 Fixed manufacturing overhead, allocated 9 135,000 Total cost $42 $630,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Requirement 1: (a) What will be the total relevant cost of 15,000 units, if they are manufactured internally? (Omit the "$" sign in your response.) Total relevant cost $ 435000 (b) Should the outside supplier's offer be accepted? Reject Worksheet Difficulty: Easy Learning Objective: 11-03 Prepare a make or buy analysis. Requirement 2: 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 $150,000 per year. (a) What will be the total relevant cost of 15,000 units, if they are manufactured internally? (Omit the "$" sign in your response.) Total relevant cost $ 585000 5/28/2011 Assignment Print View ezto.mhhm.mcgraw-hill.com/hm.tpx 1/9
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3. aw ard: 5 points (b) Should Troy Engines, Ltd., accept the offer to buy the carburetors for $35 per unit? Accept Worksheet Difficulty: Easy Learning Objective: 11-03 Prepare a make or buy analysis. Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit product cost is $149.00 as shown below: Direct materials $84.00 Direct labor 45.00 Manufacturing overhead 20.00 Unit product cost $149.00 Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no effect on the company's regular sales and the order could be fulfilled using the company's existing capacity without affecting any other order. Required:
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This note was uploaded on 06/21/2011 for the course ACC 208 taught by Professor Ahadiat during the Spring '07 term at Cal Poly Pomona.

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ACC208CH11HW - Assignment Print View 8/9/10 10:26 AM...

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