$15$

View Policies

$-13$ : :

Current Attempt in Progress

Bramble has recently started to manufacture 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 $($$$45$ per robot$)$

$$900,000$

Direct labour $($$$25$ per robot$)$

$500,000$

Variable overhead $($$$7$ per robot$)$

$140,000$

Allocated fixed overhead $($$$24$ per robot$)$

$480,000$

Total

$$2,020,000$

Bramble is approached by Lawn Inc., which offers to make RecRobo for $$78$ per unit or $$1,560,000.$

Using incremental analysis, determine whether Bramble should accept this offer under each of the following independent

assumptions:

$(1)$ Assume that $$320,000$ of the fixed overhead cost is avoidable. $($If an amount reduces the net income then enter with a negative sign preceding the number e g$.-15,000$ or parenthesis, e$.$g$.(15,000).$ While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.$)$

Make

Buy

Net Income

Increase $($Decrease$)$