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 overhead Total $50 106 32 94 $282 Trailblazers has offered to sell the assembly to Mobility for $220 each. The total oftler 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: 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 i

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please do not give solution in image format thanku

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 overhead
Total
$50
106
32
94
$282
Trailblazers has offered to sell the assembly to Mobility for $220 each. The total oftler 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:
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
Difference
Trailblazers offer
higher
Materials
Tower
Labor
Towar
Variable overhead)
Tower
Fixed overhead applied)
Tower
Total costs
S
0 $
Tower
b. Should Mobility make rear wheel assemblies or buy them from Trailblazers?
Transcribed Image Text: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 overhead Total $50 106 32 94 $282 Trailblazers has offered to sell the assembly to Mobility for $220 each. The total oftler 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: 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 Difference Trailblazers offer higher Materials Tower Labor Towar Variable overhead) Tower Fixed overhead applied) Tower Total costs S 0 $ Tower b. Should Mobility make rear wheel assemblies or buy them from Trailblazers?
Expert Solution
steps

Step by step

Solved in 3 steps with 7 images

Blurred answer
Knowledge Booster
Value Chain Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education