Exercise $13-3($Algo$)$ Make or Buy Decision $[$L$013-3]$

Troy Engines, Ltd$.,$ manufactures a variety of engines for use in heavy equipment. 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 carburetor internally:

$*$One$-$third supervisory salaries; two$-$thirds depreciation of special equipment $($no resale value$).$

Required:

What would be the financial advantage $($disadvantage$)$ of buying $12,000$ carburetors from the outside supplier?

Should the outside supplier's offer be accepted?

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 $$120,000$ per year. Given this new assumption, what would be the financial advantage

$($disadvantage$)$ of buying $12,000$ carburetors from the outside supplier?

Given the new assumption in requirement $3,$ should the outside supplier's offer be accepted?

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Required $2$

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 $12,000$ carburetors from the outside supplier?