Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,065,000 Y-Go undergarments a year. The per unit and the total costs for an individual garment when the company operates at full capacity are as follows. Per Undergarment Total $1.92 $2,044,800 0.43 457,950 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 1.02 1,086,300 1.53 1,629,450 Variable selling expenses 0.37 394,050 Totals $5.27 $5,612,550 The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 249,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1.09 per undergarment to cover all other costs and provide a proht. Presently, Klean Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go, If Klean Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order. Reject Order Accept Order Net Income Increase (Decrease) $ $ 1187500 1187500 $ Revenues 0 Variable costs: 0 500000 500000 Direct materials 187500 0 187500 Direct labor 250000 0 250000 Variable overhead 0 937500 937500 Total variable costs $ 0 250000 $ 250000 Net income Should Klean Fiber accept the Army's offer? 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 19.900 Tri-Robos is as follows. Cost $975,100 776,100 Direct materials ($49 per robot) Direct labor ($39 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($30 per robot) 119,400 597,000 Total $2,467,600 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,248,700. 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 eg.-45 or parentheses e.g. (45).) Net Income Net Income Increase (Decrease) Make Buy $ $ $ $ Direct materials 975100 975100 0 776100 0 Direct labor 776100 0 Variable overhead 119400 119400 Fixed overhead 405000 597000 192000 Purchase price -2248700 0 2248700 $ Total annual cost 2467600 tA $ 2440700 $ 26900 Using incremental analysis, determine whether Jobs should accept this offer The offer v 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 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 $ $ Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing. Current Machine New Machine Original purchase cost $15.400 $24,500 Accumulated depreciation $5,600 Estimated annual operating costs $24,800 $19.500 Remaining useful life 5 years 5 years If sold now, the current machine would have a salvage value of $8,700. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years Prepare an incremental analysis to determine whether the current machine should be replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45).) Retain Machine Replace Machine Net Income Increase (Decrease) Operating costs $ $ $ New machine cost Salvage value (old) Total $ $ The current machine should be Innova uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows. $58.02 Direct materials Direct labor 35.82 Overhead 126.50 Total $220.34 Overhead costs include variable material handling costs of $6.50, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60% variable costs and 40% fixed costs. A vendor has offered to supply the IMC2 component at a price of $300 per unit. (a) Prepare the incremental analysis for the decision to make or buy IMC2. (Round answers to 2 decimal places, eg. 12.25. Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make IMC2 (per unit) Buy IMC2 (per unit) Direct material $ $ $ Direct labor Material handling Variable overhead Purchase price Total unit cost $ $ $ Should Innova purchase the component from the outside vendor if Innova's capacity remains idle? On January 2, 2019, Twilight Hospital purchased $106,000 special radiology scanner from Bella Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating costs with this scanner are $106,000. Approximately one year later, the hospital is approached by Dyno Technology salesperson, Jacob Cullen, who indicated that purchasing the scanner in 2019 from Bella Inc. was a mistake. He points out that Dyno has a scanner that will save Twilight Hospital $26,000 a year in operating expenses over its 3-year useful life. Jacob notes that the new scanner will cost $110,000 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Jacob agrees to buy the old scanner from Twilight Hospital for $54,500. Your answer is partially correct. If Twilight Hospital sells its old scanner on January 2, 2020, compute the gain or loss on the sale. Loss on sale $ $ 22000 Retain Scanner Replace Scanner Net Income Increase (Decrease) Annual operating costs $ 318000 i $ 243000 $ 243000 New 0 scanner cost 110000 110000 Old scanner salvage -59500 -59500 Total $ 318000 $ 293500 293500 Should Twilight Hospital purchase the new scanner on January 2, 2020? Yes v