*Exercise 20-6 (Part Level Submission) Jobs, Inc. has recently started the manuf

Question

*Exercise 20-6 (Part Level Submission) 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 smartphone. The cost structure to manufacture 19,400 Tri-Robos is as follows. Direct materials ($49 per robot) Direct labor ($37 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($31 per robot) Cost $950,600 717,800 116,400 600,000 $2,384,800 Total Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $112 per unit or $2,172,800. Following are independent assumptions. (a1) Assume that $405,000 of the fixed overhead cost can be avoided. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable overhead Fixed overhead Purchase price Total annual cost s Using incremental analysis, determine whether Jobs should accept this offer. The offer 4/9

Explanation / Answer

Solution a1:

As there is net advantage of $17,000 from buying Tri-Robo, therefore jobs should accept the offer.

Solution a2:

As there is net financial disadvantage of $13,000, therefore buying offer should be rejected.

Differential Analysis- Jobs Inc. - Making Tri - Robo (alt 1) or Buying Tri-Robo (Alt2) Particulars Making Tri - Robo (Alt 1) Buying Tri Robo (Alt 2) Financial advantage (Disadvantage) of buying (Alternative 2) Costs: Purchase Price (19400*$112) $0.00 $2,172,800.00 -$2,172,800.00 Direct material $950,600.00 $0.00 $950,600.00 Direct Labor $717,800.00 $0.00 $717,800.00 Variable overhead $116,400.00 $0.00 $116,400.00 Avoidable Fixed Overhead $405,000.00 $0.00 $405,000.00 Total Cost $2,189,800.00 $2,172,800.00 $17,000.00

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