Mobility Partners makes wheelchairs and other assistive devices. For years it ha
ID: 2341618 • 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):
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 will buy instead of make if Mobility can save at least $20,000 per year. Accepting Trailblazers's offer would eliminate annual fixed overhead of $38,100.
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.)
Direct materials $ 27 Direct labor 50 Variable overhead 20 Fixed overhead 45 Total $ 142 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.) option "higher" or "lower", keeping Status Quo as the Status Quo Alternative Difference Trailblazers' offer Materials Labor Variable overhead Fixed overhead applied Total costs b. Should Mobility make rear wheel assemblies or buy them from Trailblazers? O Make BuyExplanation / Answer
a Status Quo Alternative Difference Trailblazers’ offer 0 220000 220000 Higher Materials 54000 0 54000 Lower Labor 100000 100000 Lower Variable overhead 40000 40000 Lower Fixed overhead applied 90000 51900 38100 Lower Total costs 284000 271900 12100 Lower b Make, as $20,000 savings could not be achieved. Alternatively, $12100 can be written with a negative sign