Jobs Inc. has recently started the manufacture of Tri-Robo, a three wheeled robot that can scan...

4.4 Ratings (687 Votes)

Solution a-1:

Jobs Inc.
Incremental Analysis
Particulars	Make	Buy	Net Income Increase (Decrease)
Direct Material	$10,00,000	$0	$10,00,000
Direct Labor	$8,00,000	$0	$8,00,000
Variable overhead	$1,20,000	$0	$1,20,000
Fixed Overhead	$6,00,000	$1,95,000	$4,05,000
Purchase Price	$0	$23,00,000	-$23,00,000

Total Annual Cost	$25,20,000	$24,95,000	$25,000

Jobs inc. Should accept this offer as there is Increase in net income of $25,000

Solution a-2:

Jobs Inc.
Incremental Analysis
Particulars	Make	Buy	Net Income Increase (Decrease)
Direct Material	$10,00,000	$0	$10,00,000
Direct Labor	$8,00,000	$0	$8,00,000
Variable overhead	$1,20,000	$0	$1,20,000
Fixed Overhead	$6,00,000	$6,00,000	$0
Opportunity Cost	$3,75,000	$0	$3,75,000
Purchase Price	$0	$23,00,000	-$23,00,000

Total Annual Cost	$28,95,000	$29,00,000	-$5,000

Jobs inc. Should not accept this offer as there is decrease in net income of $5,000

Solution b:

Qualitative factors that might affect the decision to purchase the robots from an outside supplier:

1. Quality of the product as compared to made by the company.

2. Timely delivery of the product.

3. Adequate quantity as per requirement will be delivered or not.

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