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 20,100 Tri-Robos is as follows.
Cost | |||
---|---|---|---|
Direct materials ($51 per robot) | $1,025,100 | ||
Direct labor ($40 per robot) | 804,000 | ||
Variable overhead ($6 per robot) | 120,600 | ||
Allocated fixed overhead ($30 per robot) | 603,000 | ||
Total | $2,552,700 |
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,331,600. Following are independent assumptions.
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 |
|
|
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Direct labor | |||||||
Variable overhead | |||||||
Fixed overhead | |||||||
Purchase price |
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Total annual cost |
Using incremental analysis, determine whether Jobs should accept this offer.
The offer select an option should not be accepted should be accepted . |
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) | |||||
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Direct materials | |||||||
Direct labor | |||||||
Variable overhead | |||||||
Fixed overhead | |||||||
Opportunity cost | |||||||
Purchase price | |||||||
Totals |
The offer select an option should not be accepted should be accepted |
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