75% > \"1 Tue 11:16 PM moodle.simmons.edu Mobility Partners makes wheelchairs an

Question

75% > "1 Tue 11:16 PM moodle.simmons.edu Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for ton its wheelchairs. A local bicycle manufacturing firm, Trailblazers, Inc., offered to sell these rear wheel assemblios 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 overhead Total $ 29 52 21 146 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 $41,60o. 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.) What is Mobility Partner's total cost to make the assembly 00 Answer Check What is the total cost to Mobility Partners if Trailblazers makes the assembly? o Answer

Explanation / Answer

Schedule of total differential costs: Make Buy Differential cost Purchase price 0 220000 220000 Increase in cost (2000*110) Direct materials 58000 0 -58000 Savings (2000*29) Direct labor 104000 0 -104000 Savings (2000*52) Variable overhead 42000 0 -42000 Savings (2000*21) Fixed overhead 88000 46400 -41600 Savings (2000*44) (88000-41600) Total -25600 Savings Savings due to buy=$25600 Mobilty should buy from trail blazers since it results in a cost saving of $25600 ( it is more than minimum required savings of $20000)

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