Mobility Partners makes wheelchairs and other assistive devices. For years it ha
ID: 2340665 • Letter: M
Question
Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm Trailblazers, Inc., offered to sell these rear wheel assemblies to Mobility. If Mobility makes the assembly, its cost per rear wheel assembly is as follows (based on annual production of 2,000 units) Direct materials Direct labor Variable overhead Fixed owerhead $ 27 50 18 46 $141 Total Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount to 2,000 rear wheel assemblies per year, which Mobility's management wil buy instead of make if Mobility can save at least $10,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $39,500 Required a. Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo Alternative Materials Labor Variable overhead Fixed overhead applied Total costs b. Should Mobility make rear wheel assemblies or buy them from Trailblazers? Make OBuyExplanation / Answer
Answer:
a)
Status
Quo
Alternative
Diffrance
Trailblazer's offer (2000*110)
220000
220000
Higher
Material (2000*27)
54000
54000
Lower
Labor (2000*50)
100000
100000
Lower
variable Overhead (2000*18)
36000
36000
Lower
Fixed Overhead applied (2000*46)
92000
52500
39500
Lower
Total Cost
282000
272500
9500
Lower
b)
Should Mobility make rear wheel assemblies or buy them from Trailblazers?
Answer: Make
Explanation:
As it desire to 10,000 saving but it only save $9,500 so it should make it
Status
Quo
Alternative
Diffrance
Trailblazer's offer (2000*110)
220000
220000
Higher
Material (2000*27)
54000
54000
Lower
Labor (2000*50)
100000
100000
Lower
variable Overhead (2000*18)
36000
36000
Lower
Fixed Overhead applied (2000*46)
92000
52500
39500
Lower
Total Cost
282000
272500
9500
Lower