Question
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
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 20,000 Tri-Robos is as follows.
Cost | |||
---|---|---|---|
Direct materials ($48 per robot) | $960,000 | ||
Direct labor ($40 per robot) | 800,000 | ||
Variable overhead ($6 per robot) | 120,000 | ||
Allocated fixed overhead ($30 per robot) | 600,000 | ||
Total | $2,480,000 |
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,260,000. 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).)
Make | Buy | Net Income Increase (Decrease) | |||||
---|---|---|---|---|---|---|---|
Direct materials | $enter direct materials in dollars | $enter direct materials in dollars | $enter direct materials in dollars | ||||
Direct labor | enter direct labor in dollars | enter direct labor in dollars | enter direct labor in dollars | ||||
Variable overhead | enter variable overhead in dollars | enter variable overhead in dollars | enter variable overhead in dollars | ||||
Fixed overhead | enter fixed overhead in dollars | enter fixed overhead in dollars | enter fixed overhead in dollars | ||||
Purchase price | enter the purchase price in dollars | enter the purchase price in dollars | enter the purchase price in dollars | ||||
Total annual cost | $enter total annual cost in dollars | $enter total annual cost in dollars | $enter total annual cost in dollars |
Using incremental analysis, determine whether Jobs should accept this offer.
The offer select an option should be acceptedshould not be accepted. |
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