Question

CALCULATOR SALE HY INSCHRIEB Exercise 7-6 a1-a2 (Video) Jobs, Inc. has recently started the manufacture of thiRobo, a three wheeled robot that can The cost structure to manufacture 20.400 TH Robes is as follows a home for free and a nd then t h is Direct materials ($51 per robot) Direct labor ($39 per robot) Variable overhead (57 per robot) Allocated fixed overhead (529 per robot) Total Cont $1,040,400 795,600 142,000 591,600 $2,570,400 12,366,400 Jobs is approached by Tier Inc, which offers to make thiRobo for $116 per unit Fowing are independent assumptions.

Answer 1

Answer-1:

Assumption-1 (i.e. $405,000 of the fixed overhead can be avoided)

STATEMENT OF INCREMENTAL ANALYSIS Make Buy Direct material Direct labour Variable overhead Fixed overhead Purchase price Total annual cost 1,040,400 795,600 142,800 591,600 $ $ 2,570,400 $ Net income increase (decrease) 1,040,400 795,600 142,800 405,000 (2,366,400) $ 186,600 2,366,400 2,553,000 $

Decision: The offer should be accepted, as there is incremental income of $17,400.

Answer-2:

Assumption-2 (i.e. None of the fixed overhead can be avoided)

STATEMENT OF INCREMENTAL ANALYSIS Make Buy Net income increase (decrease) 1,040,400 795,600 142,800 Direct material Direct labour Variable overhead Fixed overhead Opportunity cost Purchase price Total annual cost 1,040,400 795,600 142,800 591,600 $ 375,000 $ 2,945,400 $ 591,600 2,366,400 2,958,000 375,000 (2,366,400) (12,600) $ $

Decision: The offer should not be accepted, as there is loss of $12,600.