(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.

Case 1: The robots should be purchased from Chen Inc., please see table below.

For 20000 Robots Cost structure
$ Unit Amount
Direct Material 40 $800,000
Direct Labor 30 $600,000
Variable Overhead 6 $120,000
Allocated Fixed Overhead 25 $500,000
Total $2,020,000

Offer Was 90 $1,800,000
Fixed Overhead (-300,000) $200,000
Total $2,000,000

Incremental Analysis
From Manufacture $2,020,000
From Offer $2,000,000
Incremental Profit $20,000

Case 2: The robots should be purchased from Chen Inc., please see table below.
For 20000 Robots Cost structure
$ Unit Amount
Direct Material 40 $800,000
Direct Labor 30 $600,000
Variable Overhead 6 $120,000
Allocated Fixed Overhead 25 $500,000
Total $2,020,000

Offer 90 $1,800,000
Fixed Overhead $500,000
Total $2,300,000

Incremental Analysis
Total Manufacturing Costs $2,020,000
From Offer $2,300,000
Additional Net Income $300,000
Incremental Profit $20,000

(a) To determine whether SY Telc should accept the offer under each of the independent assumptions, we can use incremental analysis. Incremental analysis involves comparing the incremental costs and benefits of a decision.

(1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided):
In this case, we need to consider the incremental costs and benefits of accepting the offer. The incremental cost would include the cost of purchasing the robots and any additional expenses associated with their use. The incremental benefit would be the increase in revenue or cost savings that can be achieved by using the robots. If the incremental benefits exceed the incremental costs, it would be advisable for SY Telc to accept the offer.

(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:
In this scenario, we need to consider the opportunity cost of not using the released productive resources. If SY Telc can generate additional income of $300,000 by using those resources in another way, it should be taken into account as an incremental benefit. If the incremental benefits still exceed the incremental costs, it would be advisable for SY Telc to accept the offer.

In both cases, the incremental analysis helps to evaluate whether the benefits of accepting the offer outweigh the costs. SY Telc should only accept the offer if the incremental benefits exceed the incremental costs.

(b) When deciding whether to purchase the robots from an outside supplier, there are qualitative factors that can affect the decision. These factors are not explicitly measured in monetary terms but still play a significant role in the decision-making process. Some of the qualitative factors that might be considered include:

1. Quality and reliability of the robots: How reliable are the robots and how well do they perform? The quality of the robots can impact their effectiveness and potential benefits.

2. Supplier reputation and support: Is the outside supplier known for its good reputation and customer support? Having a reliable and supportive supplier can contribute to a positive experience and successful implementation of the robots.

3. Compatibility with existing systems: Will the robots seamlessly integrate with SY Telc's existing systems and processes? Compatibility can affect the ease of implementation and potential disruptions.

4. Training and skill requirements: What level of training or new skills will be required to operate and maintain the robots? This factor considers the availability of necessary skills and the associated costs and time for training.

5. Long-term implications: How will the introduction of the robots impact the organization in the long run? Considerations include future scalability, adaptability to changing needs, and potential impacts on the workforce.

These qualitative factors should be carefully analyzed and considered alongside the quantitative analysis when making the decision to purchase robots from an outside supplier.