Mobility Partners makes wheelchairs and other assistive devices. For years it ha
ID: 2422991 • 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 $220 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 $80,000. Required: Prepare a schedule that shows the differential costs per rear wheel assemblies.Explanation / Answer
Particulars Amount ( Make) Amount ( Buy) Difference Traiblazers offer 0 440000 -440000 Materials 100000 0 100000 Direct Labor 212000 0 212000 Variable overhead 64000 0 64000 Fixed Overhead 188000 108000 80000 Total Costs 564000 548000 16000