Question

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. Cost Direct materials ($51 per robot) $979,200 Direct labor ($38 per robot) 729,600 Variable overhead ($7 per robot) 134,400 Allocated fixed overhead ($31 per robot) 595,200 Total $2,438,400 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,227,200. Following are independent assumptions. Expand question part (a1) Collapse question part (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.

Answer 1

Solution:

Differential Analysis- Troy Engines Ltd - Making Tri-Robos (alt 1) or Buying Tri - Robos (Alt2)
Particulars	Making Tri - Robos (Alt 1)	Buying Tri - Robos (Alt 2)	Financial advantage (Disadvantage) of buying (Alternative 2)
Costs:
Purchase Price (19200*$116)	$0.00	$2,227,200.00	-$2,227,200.00
Direct material	$979,200.00	$0.00	$979,200.00
Direct Labor	$729,600.00	$0.00	$729,600.00
Variable overhead	$134,400.00	$0.00	$134,400.00
Additional income from released capacity	$0.00	-$375,000.00	$375,000.00
Total Cost	$1,843,200.00	$1,852,200.00	-$9,000.00