Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear $($HTG$),$ a local outfitter that manufactures and sells backpacks, tent cases, and so on$,$ contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows $($based on annual production of $40,400$ units$).$

Direct materials $ $10\mathrm{.}00$

Direct labor $21\mathrm{.}20$

Variable overhead $6\mathrm{.}40$

Fixed overhead $4\mathrm{.}70$

Total $ $42\mathrm{.}30$

HTG has offered to sell the case to Coram for $$39$ each. The total order would amount to $40,400$ travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $$12,200$ per year. Accepting the offer would eliminate annual fixed overhead of $$76,760.$

Required:

a$.$ Prepare a schedule that shows the total differential costs.

b$.$ Should Coram continue to make the travel cases or buy them from HTG$?$ Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear $($HTG$),$ a local outfitter that manufactures and sells backpacks, tent cases, and so on$,$ contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows $($based on annual production of $40,400$ units$).$

HTG has offered to sell the case to Coram for $\backslash (\backslash$$ $39\backslash )$ each. The total order would amount to $40,400$ travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $\backslash (\backslash$$ $12,200\backslash )$ per year. Accepting the offer would eliminate annual fixed overhead of $\backslash (\backslash$$ $76,760\backslash ).$

Required:

a$.$ Prepare a schedule that shows the total differential costs.

b$.$ Should Coram continue to make the travel cases or buy them from HTG$?$

Complete this question by entering your answers in the tabs below.

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.$)$