Roy 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 $36 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 20,000 units per year direct materials $ 13 $ 260,000 direct labor 11 220,000 variable manufacturing overhead 4 80,000 fixed manufacturing overhead, traceable 6 * 120,000 fixed manufacturing overhead, allocated 9 180,000 total cost $ 43 $ 860,000 *one-third supervisory salaries; two-thirds depreciation of special equipment (no resale value).
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