Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled rob

Question

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 mobile phone. The cost structure to manufacture 19,960 Tri-Robos is as follows. Cost Direct materials ($52 per robot) $1,037,920 Direct labor ($46 per robot) 918,160 Variable overhead ($8 per robot) 159,680 Allocated fixed overhead ($25 per robot) 499,000 Total $2,614,760 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $120 per unit or $2,395,200.

Assume that $319,360 of the fixed overhead cost can be reduced (avoided). Prepare incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Determine whether Jobs should accept this offer.

Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $319,360. Prepare incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Determine whether Jobs should accept this offer.

Make Buy Net Income
Increase
(Decrease) Direct materials $

$

$

Direct labor

Variable overhead

Fixed overhead

Purchase price

Total annual cost $

$

$

Explanation / Answer

Make Buy Net Income Increase/(Decrease) Number of units 19960 19960 Direct Material 1037920 52 0 -52 direct labor 918160 46 0 -46 Variable overhead 159680 8 0 -8 allocated fixed overhead 499000 25 9 -16 Purchase price 120 120 2614760 131 129 -2 Job should not accept the offer , as the cost of making a unit of Tri Robo is lesser than buying it Make Buy Net Income Increase/(Decrease) Number of units 19960 19960 Direct Material 1037920 52 0 -52 direct labor 918160 46 0 -46 Variable overhead 159680 8 0 -8 allocated fixed overhead 499000 25 25 0 oppurtunity cost 319360 -16 -16 Purchase price 120 120 2934120 131 129 -2 Job should not accept the offer , as the cost of making a unit of Tri Robo is still lesser than buying it

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