of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks
ID: 2406595 • Letter: O
Question
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 19,400 Tri-Robos is as follows. Cost Direct materials ($49 per robot) Direct labor ($37 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($31 per robot) $950,600 717,800 116,400 600,000 $2,384,800 Total Cheyenne is approached by Tienh Inc, which offers to make Tri-Robo for $112 per unit or $2,172.800. Following are independent assumptions. Prepare an incremental analysis. Assume that $405,000 of the fixed overhead cost can be avoided. (I amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Oirect materials s Direct labor Variable overhead Fixed overhead Purchase price otal annual cost s Using incremental analysis, determine whether Cheyenne should accept this offer The offer tal anayih, Assume that none df the fixed overhead can be avoided. However, ifthe robots are purchased from Tienh Inc. Cheither ae ative sign robots are purchased from Tienh Inc. Cheyenne can use the released productive resources to generate additional income of $375,000. (1f amount decreases net income then enter the amount using either a negative preceding the number e.g. -45 or parentheses e.a. (45).) Net Income Increase EN Wile PLUS-Google w?Explanation / Answer
a Net income Make Buy Increase / decrease Direct material 950600 950600 Direct labor 717800 717800 Variable overheads 116400 116400 Fixed overheads 600000 195000 405000 Purchase price 2172800 -2172800 Total annual cost 2384800 2367800 17000 b Accept the offer
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