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Ivanhoe, 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
Ivanhoe, 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 19,300 Tri-Robos is as follows. Cost Direct materials ($51 per robot) $984,300 Direct labor ($38 per robot) 733,400 Variable overhead ($6 per robot) 115,800 Allocated fixed overhead ($31 per robot) 598,300 Total $2,431,800 Ivanhoe is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,219,500. Following are independent assumptions. (a 1) Your answer is correct. 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 eg.(45).) Net Income Increase (Decrease) Make Buy Direct materials $ 984300 i $ 0 $ 984300 Direct labor 733400 i 0 0 733400 Variable overhead 115800 i 0 115800 Fixed overhead 598300 i 193300 i 101 405000 Purchase price 0 2219500 i -2219500 Total annual cost $ 2431800 2412800 i 19000 Using incremental analysis, determine whether Ivanhoe should accept this offer. The offer should be accepted Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Ivanhoe can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg: (45).) Net Income Increase (Decrease) Make Buy 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
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