Sunland, 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 20,800 Tri-Robos is as follows.

		Cost
Direct materials ($50 per robot)		$1,040,000
Direct labor ($40 per robot)		832,000
Variable overhead ($6 per robot)		124,800
Allocated fixed overhead ($29 per robot)		603,200
Total		$2,600,000

Sunland is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,392,000.

Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Sunland can use the released productive resources to generate additional income of $375,000.

	Make		Buy		Net Income Increase (Decrease)
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