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 21,100 Tri-Robos is as follows.

		Cost
Direct materials ($49 per robot)		$1,033,900
Direct labor ($40 per robot)		844,000
Variable overhead ($7 per robot)		147,700
Allocated fixed overhead ($28 per robot)		590,800
Total		$2,616,400

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $114 per unit or $2,405,400. Following are independent assumptions.

(a1)

• Your Answer
• Correct Answer

Partially correct answer iconYour answer is partially 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 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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Solution

Attempts: 3 of 3 used

(a2)

Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $375,000. (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
Opportunity cost		enter the opportunity cost in dollars		enter the opportunity cost in dollars		enter the opportunity cost in dollars
Purchase price		enter the purchase price in dollars		enter the purchase price in dollars		enter the purchase price in dollars
Totals		$enter total amount in dollars		$enter total amount in dollars		$enter total amount in dollars

Based on the above assumptions, indicate whether the offer should be accepted or rejected?

The offer select an option should not be acceptedshould be accepted.

**I only need a2