Crane, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 19,000 Tri-Robos is as follows.

		Cost
Direct materials ($48 per robot)		$912,000
Direct labor ($38 per robot)		722,000
Variable overhead ($5 per robot)		95,000
Allocated fixed overhead ($32 per robot)		608,000
Total		$2,337,000

Crane is approached by Tienh Inc., which offers to make Tri-Robo for $111 per unit or $2,109,000. Following are independent assumptions.

Assume that $405,000 of the fixed overhead cost can be avoided. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$		$		$
Direct labor
Variable overhead
Fixed overhead
Purchase price
Total annual cost		$		$		$

Using incremental analysis, determine whether Crane should accept this offer.

The offer

should be acceptedshould not be accepted

.

Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Crane can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$		$		$
Direct labor
Variable overhead
Fixed overhead
Opportunity cost
Purchase price
Totals		$		$		$

Based on the above assumptions, indicate whether the offer should be accepted or rejected?

The offer

should not be accepted should be accepted

.