Current Attempt in Progress Kingbird 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 ($38 per robot) $760,000 Direct labour ($34 per robot) 680,000 Variable overhead ($6 per robot) 120,000 Allocated fixed overhead ($25 per robot) Total 500,000 $2,060,000 Kingbird is approached by Accustart Inc., which offers to make RecRobo for $78 per unit or $1,560,000. Using incremental analysis, determine whether Kingbird 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 Direct materials Direct labour Buy 760000 $ 680000 Variable overhead 120000 Fixed overhead Purchase price 500000 0 $ 0 Net Income Increase (Decrease) 760000 680000 0 120000 320000 1560000 180000 (1560000) Total annual cost $ 2060000 $ (1880000) $ 180000 Should the offer be accepted? Should the offer be accepted? Yes (2) Assume that none of the fixed overhead is avoidable. However, if the robots are purchased from Accustart Inc., Kingbird can use the released productive resources to generate additional income of $220,000. (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.) Direct materials Direct labour Make Buy 760000 $ 680000 Variable overhead 120000 Fixed overhead Purchase price Opportunity cost 500000 320000 220000 1560000 0 SA Net Income Increase (Decrease) 760000 680000 120000 180000 (1560000) 220000 Total annual cost $ 2280000 (1880000) $ 400000 Should the offer be accepted? Yes