80.2K

Verified Solution

Link Copied!

Ivanhoe, 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 19,300 Tri-Robos is as follows.

		Cost
Direct materials ($ 51 per robot)		$ 984,300
Direct labor ($ 38 per robot)		733,400
Variable overhead ($ 6 per robot)		115,800
Allocated fixed overhead ($ 31 per robot)		598,300
Total		$ 2,431,800

Ivanhoe is approached by Tienh Inc., which offers to make Tri-Robo for $ 115 per unit or $ 2,219,500. Following are independent assumptions.

(a1)

Assume that $ 405,000 of the fixed overhead cost can be avoided. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$ enter a dollar amount		$ enter a dollar amount		$ enter a dollar amount
Direct labor		enter a dollar amount		enter a dollar amount		enter a dollar amount
Variable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
Fixed overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
Purchase price		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total annual cost		$ enter a total amount		$ enter a total amount		$ enter a total amount

Using incremental analysis, determine whether Ivanhoe should accept this offer.

The offer select an option should be acceptedshould not be accepted.

Answer & Explanation Solved by verified expert

See Answer