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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
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 19,100 Tri-Robos is as follows. Cost Direct materials ($ 51 per robot) $ 974,100 Direct labor ($ 41 per robot) 783.100 Variable overhead ($5 per robot) 95,500 Allocated fixed overhead ($ 31 per robot) 592.100 Total $ 2,444.800 Crane is approached by Tienh Inc., which offers to make Tri-Robo for $117 per unit or $2,234,700. Following are independent assumptions. (21) Your Answer Correct Answer (Used) 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).) Net Income Increase (Decrease) Make Buy Direct materials $ 974.100 i $ i $ 974,100 Direct labor 783,100 i 783,100 Variable overhead 95.500 i 95,500 Fixed overhead 592,100 187,100 405,000 Purchase price 2,234,700 -2,234,700 Total annual cost $ 2,444,800 2,421,800 $ 23,000 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).) Net Income Increase (Decrease) Make Buy Direct materials $ LA $ $ 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
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