I need help with the following problem: Exercise 7-6 Jobs, Inc. has recently sta
ID: 2445092 • Letter: I
Question
I need help with the following problem:
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 smartphone. The cost structure to manufacture 19,700 Tri-Robos is as follows Direct materials ($52 per robot) Direct labor ($40 per robot) Variable overhead ($7 per robot) Allocated fixed overhead ($30 per robot) Cost $1,024,400 788,000 137,900 600,000 $2,550,300 Total Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $119 per unit or $2,344,300 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. -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 LINK TO TEXT VIDEO: APPLIED SKILLSExplanation / Answer
Particulars Make Buy Net inc increase(Decrease) Direct Materials 1,024,400.00 1,024,400.00 Direct Labour 788,000.00 788,000.00 Variable Overhead 137,900.00 137,900.00 Fixed Cost 405,000.00 405,000.00 Purchase Price 2,344,300.00 (2,344,300.00) Total unit Cost 2,355,300.00 2,344,300.00 11,000.00 Yes offer should be accepted as it will result in gain of $11,000 Particulars Make Buy Net inc increase(Decrease) Direct Materials 1,024,400.00 1,024,400.00 Direct Labour 788,000.00 788,000.00 Variable Overhead 137,900.00 137,900.00 Oppurtunity Cost (375,000.00) 375,000.00 Purchase Price 2,344,300.00 (2,344,300.00) Total unit Cost 1,950,300.00 1,969,300.00 (19,000.00) No offer should not be accepted