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Mobility Partners makes wheelchairs and other assistive devices

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 1,800 units):

 

Direct materials $30 

Direct labor  110

Variable overhead  15 

Fixed overhead  38 

Total $193 

 

Trailblazers has offered to sell the assembly to Mobility for $161 each. The total order would amount to 1,800 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 $39,350.

How much would Mobility save by purchasing the rear wheel assembly from Trailblazers? (Enter savings as positive number. If purchasing the rear wheel assembly would result in a higher cost, enter the difference as a negative number. For example, if it would cost Mobility $1,000 more to purchase the wheel assembly from Trailblazers, you would enter -1,000.)

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