Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (38% of direct labor) Total cost per unit . If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs. Unit costs: $25.00 16.00 Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit Total unit costs 6.08 a. Prepare a differential analysis dated February 24 to determine whether the company should Make Carrying Case (Alternative 1) or Buy Carrying Case (Alternative 2). If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. $47.08 Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) February 24 Make Carrying Case (Alternative 1) 0.00 25.00 X 16 X Buy Carrying Case (Alternative 2) 56 X Differential Effects (Alternative 2) $
Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (38% of direct labor) Total cost per unit . If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs. Unit costs: $25.00 16.00 Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit Total unit costs 6.08 a. Prepare a differential analysis dated February 24 to determine whether the company should Make Carrying Case (Alternative 1) or Buy Carrying Case (Alternative 2). If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. $47.08 Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) February 24 Make Carrying Case (Alternative 1) 0.00 25.00 X 16 X Buy Carrying Case (Alternative 2) 56 X Differential Effects (Alternative 2) $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Make-or-Buy Decision
Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit.
The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct
labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials
Direct labor
Factory overhead (38% of direct labor)
Total cost per unit
If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory
overhead costs associated with the cases are expected to be 15% of the direct labor costs.
.
Unit costs:
$25.00
16.00
6.08
a. Prepare a differential analysis dated February 24 to determine whether the company should Make Carrying Case (Alternative 1) or
Buy Carrying Case (Alternative 2). If required, round your answers to two decimal places. If an amount is zero, enter "0". For
those boxes in which you must enter subtracted or negative numbers use a minus sign.
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Total unit costs
$47.08
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
February 24
Make Carrying
Case (Alternative 1)
0.00 ✓
25.00 X
16 x
Buy Carrying
Case (Alternative 2)
56 X
Differential Effects
(Alternative 2)
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