Ohio State University ACCTMIS 2000 Troy Engines manufactures a variety of engines for use in heavy equipment

Subject:AccountingPrice:4.87 Bought7

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Ohio State University ACCTMIS 2000

Troy Engines 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 for a cost of $36 per carburetor. To evaluate this offer, Troy Engines has gathered the following information relating to its own cost of producing the carburetor internally:

      per unit cost  15,000 units per year      

  direct materials ...........   $12        $180,000

  direct labor ...............   $8        $120,000

  variable overhead ..........   $7        $ 105,000

  allocated fixed overhead ...   $8        $120,000

If Troy Engines purchases the carburetors from the outside supplier, the space that is being used to produce the carburetors can be rented to a small business who will pay Troy $20,000 per year for the space.

Calculate the selling price charged by the outside supplier that would make Troy Engines economically indifferent between making and buying the carburetor.