1 a.
b
Ivanhoe has recently started to manufacture RecRobo, a three wheeled robot that can scan a home for fines and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20.000 RecRobos is as follows: Cost Direct materials ($42 per robot 5840.000 Direct labour (527 per robot) Variable overhead (54 per robot) 80.000 Allocated towed overhead ($20 per robot) Total 540.000 400.000 $180.000 Ivanhoe is approached by Dutty Dog Inc. Which offers to make RecRobo for 569 per unit or $1.090.000 Using incremental analysis, determine whether Ivanhoe should accept this offer ander each of the following independent assumption (1) Assume that $240,000 of the towed overhead cost is avoidable. If an amount reduces the net income then enter with a nepotive sin preceding the numbers 15,000 or porte 15.000 Wiene approches repetition in costs should be included in both options when solving this problem) Net Income Increase (Decree) Make Buy Should the offerte sted! (2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Duffy Dog Inc. Ivanhoe can use the released productive resources to generate additional income of $140,000. (If an amount reduces the net income then enter with a negative sign preceding the number eg. -15,000 or parenthesis, eg. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Net Income Increase (Decrease) Make Buy $ Should the offer be accepted? Ivanhoe has recently started to manufacture RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 RecRobos is as follows: Cost $840,000 540,000 Direct materials (542 per robot) Direct labour ($27 per robot) Variable overhead (S4 per robot) Allocated fixed overhead ($20 per robot) Total 80,000 400,000 $1,860,000 Wanhoe is approached by Duffy Dog Inc, which offers to make RecRobo for $69 per unit or $1,380,000, Using incremental analysis, determine whether Ivanhoe should accept this offer under each of the following independent assumptions: (1) Assume that $240,000 of the fixed overhead cost is avoidable. (If an amount reduces the net income then enter with a negative sign preceding the number es -15,000 or parenthesis, eg (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Net Income Increase (Decrease) Make Buy $ Should the offer be accepted? Yes v (2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Duffy Dog Inc, Ivanhoe can use the released productive resources to generate additional income of $140,000. (If an amount reduces the net income then enter with a negative sin preceding the number eg.-15,000 or parenthesis, es. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Net Income Increase (Decrease) Make Buy Should the offer be accepted
