Question

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 20,500 Tri-Robos is as follows. Cost Direct materials ($52 per robot) $1,066,000 Direct labor ($38 per robot) 779,000 Variable overhead ($7 per robot) 143,500 Allocated fixed overhead ($29 per robot) 594,500 Total $2,583,000 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,378,000.

Answer 1

the question is incomplete, so I looked for similar questions (see attached image).

this is a differential analysis that compares two alternative situations:

Make Buy Net income increase

(decrease)

materials $1,066,000 $0 $1,066,000

labor $779,000 $0 $779,000

var. overhead $143,500 $0 $143,500

fixed overhead $594,500 ($405,000) $999,500

purchase price $0 $2,378,000 ($2,378,000)

total $2,583,000 $1,973,000 $610,000

If Jobs decides to purchase the Tri-Robos from Tienh, and it is able to avoid $405,000 in fixed cots, then its operating income should increase by $610,000.