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E7.6 (LO 3), E 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 20,000 Tri-Robos is as follows. Cost $1,000,000 800,000 120,000 600,000 $2,520,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000. Instructions a. Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions. 1. Assume that $405,000 of the fixed overhead cost can be avoided. 2. 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. b. Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier. Direct materials ($50 per robot) Direct labor ($40 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($30 per robot) Total Prenare incremental analysis for make-or-buu decision

E7.6 (LO 3), E 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 20,000 Tri-Robos is as follows. Cost $1,000,000 800,000 120,000 600,000 $2,520,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000. Instructions a. Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions. 1. Assume that $405,000 of the fixed overhead cost can be avoided. 2. 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. b. Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier. Direct materials ($50 per robot) Direct labor ($40 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($30 per robot) Total Prenare incremental analysis for make-or-buu decision

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E7.6 (LO 3), E 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 20,000 Tri-Robos is as follows. Cost $1,000,000 800,000 120,000 600,000 $2,520,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000. Instructions a. Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions. 1. Assume that $405,000 of the fixed overhead cost can be avoided. 2. 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. b. Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier. Direct materials ($50 per robot) Direct labor ($40 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($30 per robot) Total Prenare incremental analysis for make-or-buu decision
Transcribed Image Text:E7.6 (LO 3), E 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 20,000 Tri-Robos is as follows. Cost $1,000,000 800,000 120,000 600,000 $2,520,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000. Instructions a. Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions. 1. Assume that $405,000 of the fixed overhead cost can be avoided. 2. 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. b. Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier. Direct materials ($50 per robot) Direct labor ($40 per robot) Variable overhead ($6 per robot) Allocated fixed overhead ($30 per robot) Total Prenare incremental analysis for make-or-buu decision
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