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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
EX25-7
![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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab307684-a64f-452f-8abe-6df9fec5e4e1%2Fd7a6dfb6-7eb9-4a11-8c77-785dea931497%2Fuvbu6t_processed.png&w=3840&q=75)
Transcribed Image Text: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.
![a.
ė
Costs:
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
February 24
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Income (loss)
Make Carrying
Case
(Alternative 1)
Assuming there are no better uses for the spare capacity,
the carrying cases should be
would
by
The fixed factory overhead is
Buy Carrying
Case
(Alternative 2)
since costs per unit
by doing so.
to the decision.
Differential Effect
on Income
(Alternative 2)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab307684-a64f-452f-8abe-6df9fec5e4e1%2Fd7a6dfb6-7eb9-4a11-8c77-785dea931497%2Fm5cz8d9_processed.png&w=3840&q=75)
Transcribed Image Text:a.
ė
Costs:
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
February 24
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Income (loss)
Make Carrying
Case
(Alternative 1)
Assuming there are no better uses for the spare capacity,
the carrying cases should be
would
by
The fixed factory overhead is
Buy Carrying
Case
(Alternative 2)
since costs per unit
by doing so.
to the decision.
Differential Effect
on Income
(Alternative 2)
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