Exercise 20-6 LINK TO TEXT LINK TO TEXT Exercise 20-6 Jobs, Inc. has recently st

Question

Exercise 20-6

LINK TO TEXT

LINK TO TEXT

Exercise 20-6

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.
Cost Direct materials ($49 per robot) $950,600 Direct labor ($37 per robot) 717,800 Variable overhead ($6 per robot) 116,400 Allocated fixed overhead ($31 per robot) 600,000     Total $2,384,800
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $112 per unit or $2,172,800.

Following are independent assumptions.

Explanation / Answer

a Make Buy Net Income Increase (Decrease) Direct materials 950600 950600 Direct labor 717800 717800 Variable overhead 116400 116400 Fixed overhead 600000 195000 405000 Purchase price 2172800 -2172800 Total annual cost 2384800 2367800 17000 The offer should be accepted b Make Buy Net Income Increase (Decrease) Direct materials 950600 950600 Direct labor 717800 717800 Variable overhead 116400 116400 Fixed overhead 600000 600000 0 Opportunity cost 375000 375000 Purchase price 2172800 -2172800 Total annual cost 2759800 2772800 -13000 The offer should not be accepted

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