eBook Make-or-Buy Decision Show Me How Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 39% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $25.00 16.00 Direct labor Factory overhead (39% of direct labor) 6.24 Total cost per unit $47.24 If Pizana 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. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Make Carrying Case Buy Carrying Case Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Line Item Description Unit costs: Purchase price Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit costs Feedback
eBook Make-or-Buy Decision Show Me How Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 39% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $25.00 16.00 Direct labor Factory overhead (39% of direct labor) 6.24 Total cost per unit $47.24 If Pizana 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. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Make Carrying Case Buy Carrying Case Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Line Item Description Unit costs: Purchase price Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit costs Feedback
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:eBook
Make-or-Buy Decision
Show Me How
Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 per unit. The company, which is currently
operating below full capacity, charges factory overhead to production at the rate of 39% of direct labor cost. The unit costs to produce comparable carrying cases are
expected to be as follows:
Direct materials
$25.00
16.00
Direct labor
Factory overhead (39% of direct labor)
6.24
Total cost per unit
$47.24
If Pizana 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. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your
answers to two decimal places. If an amount is zero, enter "0".
Differential Analysis
Make (Alt. 1) or Buy (Alt. 2) Carrying Case
May 31
Make Carrying Case Buy Carrying Case Differential Effects
(Alternative 1)
(Alternative 2)
(Alternative 2)
Line Item Description
Unit costs:
Purchase price
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
Total unit costs
Feedback
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education