SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks

ACC 560 Week 5 Assignment

E7-6 SY Telc has recently started the manufacture of 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 RecRobo’s is as follows.

Cost
Direct materials ($40 per robot) $800,000
Direct labor ($30 per robot) 600,000
Variable overhead ($6 per robot) 120,000
Direct labor ($30 per robot) 600,000
Variable overhead($6 per robot) 120,000
Allocated fixed overhead($25 per robot) 500,000
Total $2,020,000
SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000.

Instructions
(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.

Click here for the solution: SY Telc has recently started the manufacture of RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks

Montgomery Company purchased an electric wax melter on April 30, 2013, by trading in its old gas model and paying the balance in cash

E10-18 (Nonmonetary Exchange) Montgomery Company purchased an electric wax melter on April 30, 2013, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.

List price of new melter $15,800
Cash paid 10,000
Cost of old melter (5-year life, $700 residual value) 12,700
Accumulated depreciation—old melter (straight-line) 7,200
Secondhand fair value of old melter 5,200

Instructions
Prepare the journal entry(ies) necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Montgomery’s year ends on December 31, and depreciation has been recorded through December 31, 2012.


Click here for the solution: Montgomery Company purchased an electric wax melter on April 30, 2013, by trading in its old gas model and paying the balance in cash