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 21,300 Tri-Robos is as follows. Cost Direct materials ($51 per robot) $1,086,300 Direct labor ($39 per robot) 830,700 Variable overhead ($5 per robot) 106,500 Allocated fixed overhead ($28 per robot) 600,000 Total $2,623,500 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,406,900. Following are independent assumptions.

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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 21,300 Tri-Robos is as follows. Direct materials ($51 per robot) Direct labor ($39 per robot) Variable overhead ($5 per robot) Allocated fixed overhead (s28 per Cost $1,086,300 830,700 106,500 600,000 $2,623,500 robot) Total Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,406,900. 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. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable overhead Fixed overhead Purchase price

Explanation / Answer

Ans) the offer should be accepted as net income increases by $21,600

$21600

Make Buy Net Income Increase
(Decrease) Direct Materials 1,086,300 $0 $1,086.300 Direct Labor 830,700 $0 $830,700 Variable Overhead $106,500 $0 $106,500 Fixed Overhead $600,000 $195,000 $405000 Purchase Price $0 $2,406,900 (2,406,900) Total Annual Cost 2,623,500 $2,601,900

$21600

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