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Current Attempt in Progress Whispering Winds has recently started to manufacture RecRobo, a three-wheeled robot that can scan a home for fires and gas
Current Attempt in Progress Whispering Winds 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: Direct materials ($38 per robot) Cost $760,000 Direct labour ($33 per robot) Variable overhead ($5 per robot) 660,000 100,000 Allocated fixed overhead ($22 per robot) 440,000 Total $1,960,000 Whispering Winds is approached by Paver Inc., which offers to make RecRobo for $72 per unit or $1,440,000. Using incremental analysis, determine whether Whispering Winds 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 e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) 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 e.g.-15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Should the offer be accepted? Buy Make $ $ $ Net Income Increase (Decrease) (2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Paver Inc., Whispering Winds 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 e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Should the offer be accepted? Make Buy $ $ $ Net Income Increase (Decrease)
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