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. Cost Direct materials ($50 per robot) $1,000,000 Direct labor ($40 per robot) 800,000 Variable overhead ($6 per robot) 120,000 Allocated fixed overhead ($30 per robot) 600,000 Total $2,520,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $115 per unit or $2,300,000. (b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier.
2 answers:
Answer:
Part A
Purchasing the product would result in saving of $25000, if the fixed overhead of $405000 can be avoided.
Part B
Making the product would result in saving of $5000.
Explanation:
It is important to consider only the relevant cost i.e. those cost which will not be incurred if a particular decision is made and will incur if the other option is chosen.
Part A
Purchasing the product would result in saving of $25000, if the fixed overhead of $405000 can be avoided.
The Relevant cost of manufacturing the product and the purchase price are as computed below in the second image.
Part B
Making the product would result in saving of $5000.
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