haroah 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 19,900 RecRobos is as follows:

		Cost
Direct materials ($40 per robot)		$796,000
Direct labour ($32 per robot)		636,800
Variable overhead ($8 per robot)		159,200
Allocated fixed overhead ($20 per robot)		398,000
Total		$1,990,000

Pharoah is approached by Foress Inc., which offers to make RecRobo for $76 per unit or $1,512,400. Using incremental analysis, determine whether Pharoah should accept this offer under each of the following independent assumptions: (1) Assume that $238,800 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.)

		Make		Buy		Net Income Increase (Decrease)
select an item Direct materialsTotal annual costPurchase priceVariable overheadDirect labourFixed overhead		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Variable overheadPurchase priceFixed overheadTotal annual costDirect labourDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Purchase priceVariable overheadDirect materialsDirect labourFixed overheadTotal annual cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct materialsFixed overheadDirect labourPurchase priceTotal annual costVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct labourPurchase priceTotal annual costFixed overheadDirect materialsVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Direct materialsTotal annual costFixed overheadVariable overheadDirect labourPurchase price		$enter a total amount		$enter a total amount		$enter a total amount

Should the offer be accepted?

select an option NoYes

(2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Foress Inc., Pharoah can use the released productive resources to generate additional income of $138,800. (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.)

		Make		Buy		Net Income Increase (Decrease)
select an item Variable overheadFixed overheadDirect materialsOpportunity costDirect labourTotal annual costPurchase price		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Variable overheadPurchase priceTotal annual costFixed overheadDirect labourDirect materialsOpportunity cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Total annual costDirect labourVariable overheadFixed overheadDirect materialsOpportunity costPurchase price		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Fixed overheadPurchase priceVariable overheadDirect materialsOpportunity costTotal annual costDirect labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct labourDirect materialsPurchase priceFixed overheadOpportunity costVariable overheadTotal annual cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct materialsFixed overheadOpportunity costVariable overheadTotal annual costPurchase priceDirect labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Fixed overheadTotal annual costOpportunity costDirect labourPurchase priceVariable overheadDirect materials		$enter a total amount		$enter a total amount		$enter a total amount

Should the offer be accepted?

select an option YesNo