sy telc has recently started the manufacture of recrobo a three wheeled robot that 385603

SY 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 RecRobos is as follows. Cost 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) 500,000 Total $2,020,000 SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000. Instructions (a) Using incremental analysis, determine whether SY Telc should accept this offer under each of the following independent 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. __________________________________________________________________________________________________ EXERCISE 9 6 (a) (1) Decision Net Income Make Buy Increase (Decrease) Direct materials $0 Direct labor 0 Variable overhead 0 Fixed overhead 0 Purchase price 0 Total annual cost $0 $0 $0 Accept Offer ?? Yes or No Yes (2) Decision Net Income Make Buy Increase (Decrease) Direct materials $0 Direct labor 0 Variable overhead 0 Fixed overhead 0 Opportunity cost 0 Purchase price 0 Totals $0 $0 $0 Accept Offer ?? Yes or No (b) Qualitative Factors: