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Compute the cash payback period

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Question - CostFollowing are independent assumptions: 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 ($48 per robot) $960,000

Direct labor ($40 per robot) 800,000

Variable overhead ($6 per robot) 120,000

Allocated fixed overhead ($30 per robot) 600,000

Total $2,480,000

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $113 per unit or $2,260,000.

Assume that $405,000 of the fixed overhead cost can be avoided.

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

Rihanna Company is considering purchasing new equipment for $584,800. It is expected that the equipment will produce net annual cash flows of $68,000 over its 10-year useful life. Annual depreciation will be $58,480. Compute the cash payback period.

Reference no: EM132960879

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