Telc has recently started the manufacture of recrobo a

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Reference no: EM13600045

Telc has recently started the manufacture of RecRobo, 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 RecRobo's is as follows:

Direct materials ($40 per robot) $800,000
Direct labor ($30 per robot) 600,000
Variable overhead ($6 per robot) 120,000
Allocated fixed overhead ($25 per robot) 5,800,000
Total 2,020,000

Instructions:
a) Using incremental analysis, determine whether SY Telc should accept this offer under each of the following indepedent assumptions.
1. Assume that $300,000 of the fixed overhead cost can be reduced (avoided).
2. Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Chen Inc., SY Telc can use the released productive resources to generate additional income of $300,000.

b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier.

Reference no: EM13600045

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