Make-or-Buy Decisions 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:

These costs are based on annual production of 2,000 units. Trailblazers 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 making if the company can save at least \($10,000\) per year. Accepting Trailblazer’s offer would eliminate annual fixed overhead of \($40,000\).

Required Should Mobility make rear wheel assemblies or buy them from Trailblazers? Prepare a schedule that shows the differential costs per rear wheel assembly.

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Direct materials..... Direct labor Variable overhead Fixed overhead Total... $ 25 53 16 47 $141