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

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 as?umptions. (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 Using incremental analysis, determine whether Jobs should accept this offer. The offer 4/9/2018

Explanation / Answer

The offer should be accepted as it will result in saving of 17000

Make Buy Net Income Increase /(decrease) Direct material 950600 0 950600 Direct labor 717800 0 717800 Variable overhead 116400 0 116400 Fixed overhead 600000 195000 405000 Purchase price 0 2172800 (2172800) Total annual cost 2384800 2367800 17000

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