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.
