Waterway has recently started to manufacture RecRobo, 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 19,900 RecRobos is as follows: Cost Direct materials ($45 per robot) $895,500 Direct labor ($31 per robot) 616,900 Variable overhead ($8 per robot) 159,200 Allocated fixed overhead ($23 per robot) 457,700 Total $2,129,300 Waterway
Waterway has recently started to manufacture RecRobo, 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 19,900 RecRobos is as follows: Cost Direct materials ($45 per robot) $895,500 Direct labor ($31 per robot) 616,900 Variable overhead ($8 per robot) 159,200 Allocated fixed overhead ($23 per robot) 457,700 Total $2,129,300 Waterway
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Waterway has recently started to manufacture RecRobo, 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 19,900 RecRobos is as follows:
Cost | |
Direct materials ($45 per robot) | $895,500 |
Direct labor ($31 per robot) | 616,900 |
Variable overhead ($8 per robot) | 159,200 |
Allocated fixed overhead ($23 per robot) | 457,700 |
Total | $2,129,300 |
Waterway is approached by Cinrich Inc., which offers to make RecRobo for $83 per unit or $1,651,700.
Using incremental analysis, determine whether Waterway should accept this offer under this following independent assumption: (see attachement).
In attachement: see dropdown options. Please don't forget to answer: should the offer be accepted or not.
![(2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Cinrich Inc., Waterway can use the
released productive resources to generate additional income of $178,600. (If an amount reduces the net income then enter with a negative
sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be
included in both options when solving this problem.)
Should the offer be accepted?
$
Make
$
$
Buy
$
$
Net Income
Increase
(Decrease)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F76e01770-608c-4517-b069-68b85e1b351f%2Fe026cb50-6c90-428d-8c1a-40d5abef99e3%2Fr9zdppk_processed.png&w=3840&q=75)
Transcribed Image Text:(2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Cinrich Inc., Waterway can use the
released productive resources to generate additional income of $178,600. (If an amount reduces the net income then enter with a negative
sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be
included in both options when solving this problem.)
Should the offer be accepted?
$
Make
$
$
Buy
$
$
Net Income
Increase
(Decrease)
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