Accounting

posted by .

(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.

  • Accounting -

    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

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. ACC

    someone help me with this questions please 1. How would the following costs be classified (product or period) under variable costing at a retail clothing store?
  2. business accounting

    The Minnetonka Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country …
  3. accounting

    Incremental Analysis question: I know the answer is $4.20, but I can't figure out why. Sandusky Inc. has the following costs when producing 100,000 units: Variable costs $400,000 Fixed costs 600,000 An outside supplier is interested …
  4. accounting

    Looking at this question and not sure why fixed cost is 2,000 and not 6,000. ********** Galley Industries can produce 100 units of necessary component parts with the following costs: Direct Materials $20,000 Direct Labor 9,000 Variable …
  5. intro to management accounting

    The Minnetonka Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country …
  6. Management Accounting

    The Minnetonka Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country …
  7. managerial accounting

    Using the data below please do the following in an Excel spreadsheet and e-mail it directly to me. 1. Prepare an income statement using variable costing (25 points) 2. Compute the unit product cost under both absorption and variable …
  8. Managerial Accounting

    Determining and interpreting flexible budget variances Use the standard price and cost data supplied in problem 15-18. Assume that Holligan actually produced and sold 31,000 books. The actual sales price and costs incurred follow. …
  9. accounting

    The fixed cost is 100,000 the price is $80. a pair the product is 10,000 paris direct labor $35 a pair, direct material $30 a pair, total overhead $15 which adds up to $80. I dont't know how to start with this, than its asking if outsoucing …
  10. accounting

    Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 767 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company’s …

More Similar Questions