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**I am unsure how to put in the amounts for Opportunity Cost on the Incremental Analysis. Coronado has recently started to manufacture RecRobo, a three-wheeled
**I am unsure how to put in the amounts for Opportunity Cost on the Incremental Analysis.
Coronado 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: Direct materials ($40 per robot) Direct labour ($35 per robot) Variable overhead ($7 per robot) Allocated fixed overhead ($22 per robot) Total Cost $796,000 696,500 139,300 437,800 $2,069,600 Coronado is approached by Runner Inc., which offers to make RecRobo for $78 per unit or $1,552,200. Using incremental analysis, determine whether Coronado should accept this offer under each of the following independent assumptions: (2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Runner Inc., Coronado 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.) Net Income Increase (Decrease) Make Buy Direct materials $ $ 796000 $ $ $ 796000 Direct labour 696500 0 696500 Variable overhead 139300 0 139300 Fixed overhead 437800 437800 0 Purchase price 0 1552200 (1552200) Opportunity cost 0 138800 0 Total annual cost 2069600 $ 1851200 $ 79600Step by Step Solution
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