Westmount Limited has recently started the manufacture of Trio, 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 20,000 Trios is as follows.

	Cost
Direct materials ($50 per robot)	$1,000,000
Direct labor ($40 per robot)	800,000
Variable overhead ($6 per robot)	120,000
Allocated fixed overhead ($30 per robot)	600,000
Total	$2,520,000

Westmount Limited is approached by Tokyo Inc., which offers to make the Trio for $115 per unit or $2,300,000.

Required #1

Using incremental analysis, determine if Westmount Limited should accept (yes or no) this offer under the condition that if they did, $405,000 of fixed cost overhead would be avoided and not incurred; or $195,000 fixed overhead will continue to be incurred.

	Make	Buy		Effect on income

Required #2

Using incremental analysis, determine if Westmount Limited should accept this offer (yes or not) under the condition that if they did, none of the fixed overhead costs could be avoided but if the Trios were purchased from Tokyo, Westmount Limited can use the released productive resources to generate additional income of $375,000.

	Make	Buy		Effect on income