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 20,000 Tri-Robos is as follows.
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Cost |
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Direct materials ($42 per robot) |
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$840,000 |
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Direct labor ($41 per robot) |
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820,000 |
|
Variable overhead ($8 per robot) |
|
160,000 |
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Allocated fixed overhead ($25 per robot) |
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500,000 |
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Total |
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$2,320,000 |
Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $106 per unit or $2,120,000.
Assume that $320,000 of the fixed overhead cost can be reduced (avoided). Prepare incremental analysis.(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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Make |
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Buy |
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Net Income Increase (Decrease) |
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Direct materials |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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Direct labor |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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Variable overhead |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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Fixed overhead |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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Purchase price |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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Total annual cost |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
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$![](https://edugen.wileyplus.com/edugen/art2/common/pixel.gif) |
Determine whether Jobs should accept this offer.