Assume that $280,980 of the fixed overhead cost

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Description

Exercise 7-6 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 mobile phone. The cost structure to manufacture 20,070 Tri-Robos is as follows.

Cost
Direct materials ($51 per robot) $1,023,570
Direct labor ($45 per robot) 903,150
Variable overhead ($6 per robot) 120,420
Allocated fixed overhead ($23 per robot) 461,610
Total $2,508,750

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $114 per unit or $2,287,980.

Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions.

Assume that $280,980 of the fixed overhead cost can be reduced (avoided). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net Income Increase (Decrease) would be atop of last column after Buy Make Buy
Direct materials $ $ $
Direct labor
Variable overhead
Fixed overhead
Purchase price
Total annual cost $ $ $

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Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $280,980. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net Income Increase (Decrease) would be atop of last column after Buy

Make Buy
Direct materials $ $ $
Direct labor
Variable overhead
Fixed overhead
Opportunity cost
Purchase price
Totals $ $ $

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

The offer should be acceptedrejected.

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