Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (40% of direct labor) Total cost per unit $35.00 18.00 7.20 $60.20 Excel Show Me How If Diamond 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.

Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (40% of direct labor) Total cost per unit $35.00 18.00 7.20 $60.20 Excel Show Me How If Diamond 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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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