| FULL SCREEN PRINTER VERSION ·BACK Exercise 21-6 Jobs, Inc. has recently starte

Question

| FULL SCREEN PRINTER VERSION ·BACK Exercise 21-6 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 19,200 Tri-Robos is as follows. Direct materials ($51 per robot) Direct labor ($38 per robot) Variable overhead ($7 per robot) Allocated fixed overhead ($31 per robot) Cost $979,200 729,600 134,400 600,000 $2,443,200 Total Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,227,200. Following are independent assumptions 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 e.g. (15). Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable overhead 979,200 979,200 729,600 729,600 6 (A

Explanation / Answer

CALCULATION OF INCREAMENTAL PROFIT FROM ACCEPTING THE ORDERS WHEN FIXED OVERHEAD AVOIDED $ 405,000 Make Buy Net Income Direct Material $             9,79,200 $                      -   $             9,79,200 Direct Labour $             7,29,600 $                      -   $             7,29,600 Variable Overhead $             1,34,400 $                      -   $             1,34,400 Fixed Overhead $             6,00,000 $         1,95,000 405000 Purchase Price $                          -   $ 22,27,200.00 $   -22,27,200.00 Increamental Profit $                 21,000 Answer = Accept the Order because there is increamental income of $ 21,000 CALCULATION OF INCREAMENTAL PROFIT FROM ACCEPTING THE ORDERS WHEN THERE IS ADDITTIONAL INCOME 375000 Make Buy Net Income Direct Material $             9,79,200 $                      -   $             9,79,200 Direct Labour $             7,29,600 $                      -   $             7,29,600 Variable Overhead $             1,34,400 $                      -   $             1,34,400 Fixed Overhead $             6,00,000 $                      -   $             6,00,000 Opportunity Cost $                          -   $         3,75,000 $            -3,75,000 Purchase Price $                          -   $ 22,27,200.00 $   -22,27,200.00 Increamental Profit $            -1,59,000 Answer = Not Accept the Order because there is loss on purchase from outside

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