Exercise 21-6 (Part Level Submission) (a1) SHOW SOLUTION LINK TO TEXT (a2) Exerc

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Exercise 21-6 (Part Level Submission)

(a1)

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(a2)

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 20,500 Tri-Robos is as follows.
Cost Direct materials ($52 per robot) $1,066,000 Direct labor ($38 per robot) 779,000 Variable overhead ($7 per robot) 143,500 Allocated fixed overhead ($29 per robot) 600,000     Total $2,588,500
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,378,000.

Following are independent assumptions.

(a1)

Your answer is correct. 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).)
Make Buy Net Income
Increase
(Decrease) 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

should not be acceptedshould be accepted

.

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Attempts: 3 of 5 used

(a2)

Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $375,000. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Make Buy Net Income
Increase
(Decrease) Direct materials $

$

$

Direct labor

Variable overhead

Fixed overhead

Opportunity cost

Purchase price

Totals $

$

$

Based on the above assumptions, indicate whether the offer should be accepted or rejected?
The offer

should not be accepted should be accepted

.

Explanation / Answer

Answer:-a1)-

The offer should be accpted due to incremental profit of $15500.

a2)-

The offer should not be accpted due to incremental loss of $14500.

Incremental Analysis Particulars Make Buy Net Income Increase (Decrease) $ $ $ Purchase Price 0 2378000 -2378000 Direct Material 1066000 0 1066000 Direct Labor 779000 0 779000 Variable overhead 143500 0 143500 Fixed overhead 405000 0 405000 Total 2393500 2378000 15500

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