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 21,400 Tri-Robos is as follows.
Cost | |||
---|---|---|---|
Direct materials ($52 per robot) | $1,112,800 | ||
Direct labor ($39 per robot) | 834,600 | ||
Variable overhead ($5 per robot) | 107,000 | ||
Allocated fixed overhead ($28 per robot) | 599,200 | ||
Total | $2,653,600 |
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $114 per unit or $2,439,600. 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 | $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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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. |
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