Reference no: EM13494748

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 mobile phone. The cost structure to manufacture 20,000 Tri-Robos is as follows.

		Cost
Direct materials ($42 per robot)		$840,000
Direct labor ($41 per robot)		820,000
Variable overhead ($8 per robot)		160,000
Allocated fixed overhead ($25 per robot)		500,000
Total		$2,320,000

Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $106 per unit or $2,120,000.

Assume that $320,000 of the fixed overhead cost can be reduced (avoided). Prepare incremental analysis.(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		$		$		$
Direct labor
Variable overhead
Fixed overhead
Purchase price
Total annual cost		$		$		$

Determine whether Jobs should accept this offer.