Exercise 21-6 (Part Level Submission) Jobs, Inc. has recently started the manufa

Question

Exercise 21-6 (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 20,800 Tri-Robos is as follows. Direct materials ($50 per robot) Direct labor ($40 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($29 per robot) Cost $1,040,000 832,000 124,800 600,000 $2,596,800 Total obs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,392,000 Following are independent assumptions. (al) 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.-15 or parentheses eg. (15).) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable overhead Fixed overhead Purchase price Total annual cost Using incremental analysis, determine whether Jobs should accept this offer. The offer

Explanation / Answer

Net income Make Buy increase (Decrease) Direct Materials 1,040,000 1,040,000 Direct labor 832,000 832,000 Variable overhead 124,800 124,800 fixed overhead 600,000 195,000 405,000 purchase price 2,392,000 -2,392,000 total annual cost 2,596,800 2587000 9,800 the offer should be accepted

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