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Exercise 20-06 a1-a2 (Video) (Part Level Submission) Crane, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for
Exercise 20-06 a1-a2 (Video) (Part Level Submission) 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 21,300 Tri-Robos is as follows. Cost Direct materials ($51 per robot) Direct labor ($39 per robot) Variable overhead ($5 per robot) $1,086,300 830,700 106,500 Allocated fixed overhead ($28 per robot) 596,400 Total $2,619,900 Crane is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,406,900. Following are independent assumptions. (a1) Your answer is correct. 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).) Direct materials Direct labor Buy 0 Net Income Increase (Decrease) Make 1086300 1086300 $ 830700 0 830700 Variable overhead 106500 Fixed overhead Purchase price 596400 0 106500 191400 405000 0 2406900 -2406900 Total annual cost 2619900 2598300 21600 Using incremental analysis, determine whether Crane should accept this offer. should be accepted The offer (a2) 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).) Direct materials Net Income Make Buy Increase (Decrease) 1086300 Direct labor 830700 Variable overhead 106500 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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