Troy Engines Ltd. Manufactures a variety of engines. The company has always produced all of the necessary parts for its engines including all the carburettors. An outside supplier has offered to sell the type carburetor to Troy Engines, Ltd, for of cost $35 per unit. To evaluate this offer Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburettor internally: 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. If the carburetors purchased, one-third of the fixed manufacturing overhead traceable would be avoided. What would be the impact on the company’s overall net operating income purchasing the carburetors from the outside supplier? A. Net operating income would increase by $60,000 per year. B. Net operating income would decline by $10,000 per year. C. Net operating income would decline by $30,000 per year. D. Net operating income would increase by $10,000 per year.
