Cost accounting; 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 2000 units); Direct Materials - $28 , Direct labor - 55, Variable overhead -23, Fixed overhead - 43 Total -149 Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount 2000 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 $40,600. Required; a. Prepare a schedule that shows the total differential costs. Status Quo Alternative Difference Trailblazers' offer Materials Labor Variable overhead Fixed overhead applied Total costs
Cost accounting;
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 2000 units);
Direct Materials - $28 , Direct labor - 55, Variable overhead -23, Fixed overhead - 43 Total -149
Trailblazers has offered to sell the assembly to Mobility for $110 each. The total order would amount 2000 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 $40,600.
Required;
a. Prepare a schedule that shows the total differential costs.
Status Quo Alternative Difference
Trailblazers' offer
Materials
Labor
Variable overhead
Fixed overhead applied
Total costs
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
