Exercise 7-6 a1-a2 (Part Level Submission) (Video)q

Jobs, 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 19,600 Tri-Robos is as follows.

Cost

Direct materials ($50 per robot)

$980,000

Direct labor ($39 per robot)

764,400

Variable overhead ($7 per robot)

137,200

Allocated fixed overhead ($31 per robot)

607,600

Total

$2,489,200

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,273,600.

Following are independent assumptions.

(a1)

Your answer is partially correct.Try again.

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 Jobs should accept this offer.

The offer

.

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(a2)

Your answer is incorrect.Try again.

Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Jobs 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

.