. Ivanhoe 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 20,000 RecRobos is as follows:

		Cost
Direct materials ($42 per robot)		$840,000
Direct labour ($27 per robot)		540,000
Variable overhead ($4 per robot)		80,000
Allocated fixed overhead ($20 per robot)		400,000
Total		$1,860,000

I Ivanhoe is approached by Duffy Dog Inc., which offers to make RecRobo for $69 per unit or $1,380,000. . Using incremental analysis, determine whether Ivanhoe should accept this offer under each of the following independent assumptions (1) Assume that $240,000 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 costVariable overheadDirect labourPurchase priceFixed overhead		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Fixed overheadDirect materialsPurchase priceDirect labourTotal annual costVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Total annual costPurchase priceDirect materialsDirect labourFixed overheadVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Total annual costVariable overheadDirect labourPurchase priceFixed overheadDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Purchase priceTotal annual costVariable overheadDirect materialsDirect labourFixed overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Purchase priceDirect materialsTotal annual costDirect labourFixed overheadVariable overhead		$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 Duffy Dog Inc., Ivanhoe can use the released productive resources to generate additional income of $140,000. (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 Fixed overheadOpportunity costDirect materialsDirect labourPurchase priceVariable overheadTotal annual cost		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Direct materialsDirect labourFixed overheadTotal annual costVariable overheadOpportunity costPurchase price		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Variable overheadFixed overheadPurchase priceDirect materialsTotal annual costOpportunity costDirect labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct materialsVariable overheadTotal annual costOpportunity costDirect labourPurchase priceFixed overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Purchase priceDirect labourOpportunity costFixed overheadDirect materialsVariable overheadTotal annual cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Opportunity costPurchase priceDirect materialsVariable overheadFixed overheadTotal annual costDirect labour		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Total annual costVariable overheadOpportunity costFixed overheadDirect labourPurchase priceDirect materials		$enter a total amount		$enter a total amount		$enter a total amount

Should the offer be accepted?

select an option NoYes