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 19,500 Tri-Robos is as follows.

Cost

Direct materials ($48 per robot)$936,000

Direct labor ($39 per robot)760,500

Variable overhead ($6 per robot)117,000

Allocated fixed overhead ($31 per robot)604,500

Total$2,418,000

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,203,500. Following are independent assumptions.

(a1)

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).)

MakeBuyNet 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

should not be acceptedshould be accepted

.