Answer:
a. The preparation of schedule that shows the differential costs is shown below:-
b. Decision : Make
Explanation:
Particulars Make the Buy from Differential
Wheels trailblazers cost
Offer of
trailblazer $220,000 $220,000 Higher
(2,000 × $110)
Material cost $50,000 $50,000 Lower
($25 × 2,000)
Labor cost $106,000 $106,000 Lower
($53 × 2,000)
Variable
overhead $32,000 $32,000 Lower
($16 × 2,000)
Fixed
overhead $94,000 $54,000 $40,000 Lower
($47 × 2,000) ($94,000 - $40,000)
Total cost $282,000 $274,000 ($8,000) Lower
Working Note:-
1) Fixed overhead applied = $47 × 2,000 = $94000
Decision : Make
Total saving from accepting the accepting the offer of trailblazer = $8,000
Cost saving required to accept the offer of trailblazer = $10,000
Decision - Make (Since actual savings are less than savings required by $2,000)
