Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 7, Problem 7.6E
Use incremental analysis for make-or-buy decision.
(LO 3), E
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 smart-phone. 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 |
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.
Instructions
(a) Using incremental analysis, determine whether Jobs should accept this offer under each of the following independent assumptions.
(1) Assume that $405,000 of the fixed overhead cost can be avoided.
(2) Assume that none of the fixed overhead can be avoided. However, if the robots are purchased from Tienh Inc., Jobs can use the released productive resources to generate additional income of $375,000.
(b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Godo
What is the answer for this number please? Also provide solution as possible. Thank you!
pls answer and explain thanks
Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Munabhaiarrow_forwardRahularrow_forwardUse the information provided to create a standard cost card for production of one glove box switch. To make one switch it takes 16 feet of plastic-coated copper wire and 0.5 pounds of plastic material. The plastic material can usually be purchased for $20.00 per pound, and the wire costs $2.50 per foot. The labor necessary to assemble a switch consists of two types. The first type of labor is assembly, which takes 3.5 hours. These workers are paid $27.00 per hour. The second type of labor is finishing, which takes 2 hours. These workers are paid $29.00 per hour. Overhead is applied using labor hours. The variable overhead rate is $14.90 per labor hour. The fixed overhead rate is $15.60 per hour.arrow_forward
- Sir please help me urgently please provide a complete answerarrow_forwardA machine shop is considering combining machining and turning centers into a single Mazak Multi-Tasking machine center. Multitasking in the machine world is the combining of processes that were traditionally processed on multiple machines onto one machine. The ultimate goal is to turn, mill, drill, tap, bore, and finish the part in a single setup. The total investment cost is RM6 million with following anticipated cost savings: Current Cost (% saved) Savings Setup $340 000 75% Scrap/Rework 63 530 80% Operators 228 000 100% Fixturing 190 000 80% Programming time 85 000 75% Floor space 40 000 80% Maintenance 50 000 70% Coolant 20 000 65% Inspection 124 926 100% Documentation 10 000 65% Expediting 30 000 80% Total Annual Savings Most machine shops typically use 20 years and assume a 25% residual value at the end of the project life. It is also very common for a learning curve to take place in operating a complex new machine. To allow for the learning curve, assume that only 60% of the…arrow_forwardShow your solution and final answerarrow_forward
- i need the answer quicklyarrow_forwardWoodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 200,000 200,000 200,000 Installing parts Direct labor hours 20,000 20,000 16,000 Purchasing parts Number of orders 7,600 6,498 3,990 Additionally, the following activity cost data are provided: Material usage: $11 per specialized part used; $27 per commodity part; no fixed activity cost. Installing parts: $21 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $47,000 annual salary; each clerk is capable of processing 1,900…arrow_forwardMozaic Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system (CAM) or a labor-intensive production system (LIP). The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: www CAM System LIP System Direct Material $5.00 $5.60 Direct Labor (DLH) 0.5 DLH x $12 $6.00 0.8 DLH x $9 $7.20 Variable Overhead 0.5 DLH x $6 $3.00 0.8 DLH x $6 $4.80 Fixed Overhead* $2,440,000 $1,320,000 * These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company's marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: 1. Describe the circumstances under which the firm should employ each of the two manufacturing methods. 2. Identify some business…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License