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Waterway has recently started to manufacture RecRobo, a threewheeled robot that can scan a home for res and gas leaks and then transmit this information
Waterway has recently started to manufacture RecRobo, a threewheeled robot that can scan a home for res and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 19,900 RecRobos is as follows: Cost Direct materials [$45 per robot]I $895,500 Direct labour [$31 per robot) 616,900 Variable overhead [$8 per robot} 159,200 Allocated xed overhead [$23 per robot]! 457,700 Total $212 9,300 Waterway is approached by Cinrich Inc., which offers to make RecRobo for $83 per unit or $1,615 1,700. Using incremental analysis, determine whether Waterway should accept this offer under each ofthe following independent assumptions: (1) Assume that $278,600 of the fixed overhead cost is avoidable. (If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Net Income Increase Make Buy (Decrease) $ $ $ $ $ $ Should the offer be accepted?(2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Cinrich Inc., Waterway can use the released productive resources to generate additional income of $178,600. (If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Net Income Increase Make Buy (Decrease) $ $ $ v V V v $ $ Should the offer be accepted
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