Question
In: Accounting
Jobs Inc. has recently started the manufacture of Tri-Robo, a three wheeled robot that can scan...
Jobs Inc. has recently started the manufacture of Tri-Robo, a three wheeled robot that can scan a home for fires and as leaks and then transmit the information to a smartphone. The cost structure to manufacture 20,000 Tri-Robos is as follows: dIRECT MATERIALS $50 per robot - Cost $100000, Direct Labor $40 per robot - 800,000, Variable overhead $6 per robot 120,000, Allocated fixed overhead $30 per robot 600,000. Jobs is approached by Tieh Inc. which offers to ake Tri-Robo for $115 per unit or $2,300,000. a. Using incremental analysis, determine whether Jobs should accept this offer undr each of the following Independent asumptions. 1. Asume 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.
Solutions
Expert Solution
Solution a-1:
| Jobs Inc. | |||
| Incremental Analysis | |||
| Particulars | Make | Buy | Net Income Increase (Decrease) |
| Direct Material | $10,00,000 | $0 | $10,00,000 |
| Direct Labor | $8,00,000 | $0 | $8,00,000 |
| Variable overhead | $1,20,000 | $0 | $1,20,000 |
| Fixed Overhead | $6,00,000 | $1,95,000 | $4,05,000 |
| Purchase Price | $0 | $23,00,000 | -$23,00,000 |
| Total Annual Cost | $25,20,000 | $24,95,000 | $25,000 |
Jobs inc. Should accept this offer as there is Increase in net income of $25,000
Solution a-2:
| Jobs Inc. | |||
| Incremental Analysis | |||
| Particulars | Make | Buy | Net Income Increase (Decrease) |
| Direct Material | $10,00,000 | $0 | $10,00,000 |
| Direct Labor | $8,00,000 | $0 | $8,00,000 |
| Variable overhead | $1,20,000 | $0 | $1,20,000 |
| Fixed Overhead | $6,00,000 | $6,00,000 | $0 |
| Opportunity Cost | $3,75,000 | $0 | $3,75,000 |
| Purchase Price | $0 | $23,00,000 | -$23,00,000 |
| Total Annual Cost | $28,95,000 | $29,00,000 | -$5,000 |
Jobs inc. Should not accept this offer as there is decrease in net income of $5,000
Solution b:
Qualitative factors that might affect the decision to purchase the robots from an outside supplier:
1. Quality of the product as compared to made by the company.
2. Timely delivery of the product.
3. Adequate quantity as per requirement will be delivered or not.
ekkarill92 answered 7 months agoRelated Solutions
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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
Direct Materials ($50 per robot) 1,000,000, Direct Labor ( $40
per hour) $800,000, Variable Overhead ($6 per robot) $120,000,
Allocated Fixed overhead ($30 per robot) $600,000.
Jobs is approached by Tienh Inc., which offers to make Tri-Robo
for $115 per...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a
three-wheeled robot that can scan a home for fires and gas leaks
and then transmit this information to a smartphone. The cost
structure to manufacture 19,500 Tri-Robos is as follows.
Cost
Direct materials ($
48 per robot)
$ 936,000
Direct labor ($ 39
per robot)
760,500
Variable overhead
($ 6 per robot)
117,000
Allocated fixed
overhead ($ 31 per robot)
600,000
Total
$ 2,413,500
Jobs is approached by Tienh...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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
Direct materials ($50 per robot)
$1,000,000
Direct labor ($40 per robot)
800,000
Variable overhead ($6 per robot)
120,000
Allocated fixed overhead ($30 per robot)
600,000
Total
$2,520,000
Jobs is approached by Tienh Inc., which offers to make Tri-Robo...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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 21,300 Tri-Robos is as follows.
Cost
Direct materials ($51 per robot)
$1,086,300
Direct labor ($39 per robot)
830,700
Variable overhead ($5 per robot)
106,500
Allocated fixed overhead ($28 per
robot)
596,400
Total
$2,619,900
Jobs is approached by Tienh Inc., which offers to make Tri-Robo...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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 19,700 Tri-Robos is as follows.
Cost
Direct materials ($52 per robot)
$1,024,400
Direct labor ($40 per robot)
788,000
Variable overhead ($7 per robot)
137,900
Allocated fixed overhead ($30 per
robot)
591,000
Total
$2,541,300
Jobs is approached by Tienh Inc., which offers to make Tri-Robo...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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 21,000 Tri-Robos is as follows: Cost
Direct materials ($49 per robot) $1,029,000 Direct labor ($41 per
robot) 861,000 Variable overhead ($5 per robot) 105,000 Allocated
fixed overhead ($29 per robot) 600,000 Total $2,595,000 Jobs is
approached by Tienh Inc., which offers to make Tri-Robo for...
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a...
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 20,400 Tri-Robos is as follows.
Cost
Direct materials ($51 per robot)
$1,040,400
Direct labor ($39 per robot)
795,600
Variable overhead ($7 per robot)
142,800
Allocated fixed overhead ($29 per
robot)
600,000
Total
$2,578,800
Jobs is approached by Tienh Inc., which offers to make Tri-Robo...
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Allocated fixed overhead ($24
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