Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 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 unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $49.08 If Fremont 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 12% of the direct labor costs. a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $fill in the blank f124d0033014ffc_1 $fill in the blank f124d0033014ffc_2 $fill in the blank f124d0033014ffc_3 Unit costs: Purchase price fill in the blank f124d0033014ffc_4 fill in the blank f124d0033014ffc_5 fill in the blank f124d0033014ffc_6 Direct materials fill in the blank f124d0033014ffc_7 fill in the blank f124d0033014ffc_8 fill in the blank f124d0033014ffc_9 Direct labor fill in the blank f124d0033014ffc_10 fill in the blank f124d0033014ffc_11 fill in the blank f124d0033014ffc_12 Variable factory overhead fill in the blank f124d0033014ffc_13 fill in the blank f124d0033014ffc_14 fill in the blank f124d0033014ffc_15 Fixed factory overhead fill in the blank f124d0033014ffc_16 fill in the blank f124d0033014ffc_17 fill in the blank f124d0033014ffc_18 Income (Loss) $fill in the blank f124d0033014ffc_19 $fill in the blank f124d0033014ffc_20 $fill in the blank f124d0033014ffc_21 b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.

Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 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 unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $49.08 If Fremont 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 12% of the direct labor costs. a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $fill in the blank f124d0033014ffc_1 $fill in the blank f124d0033014ffc_2 $fill in the blank f124d0033014ffc_3 Unit costs: Purchase price fill in the blank f124d0033014ffc_4 fill in the blank f124d0033014ffc_5 fill in the blank f124d0033014ffc_6 Direct materials fill in the blank f124d0033014ffc_7 fill in the blank f124d0033014ffc_8 fill in the blank f124d0033014ffc_9 Direct labor fill in the blank f124d0033014ffc_10 fill in the blank f124d0033014ffc_11 fill in the blank f124d0033014ffc_12 Variable factory overhead fill in the blank f124d0033014ffc_13 fill in the blank f124d0033014ffc_14 fill in the blank f124d0033014ffc_15 Fixed factory overhead fill in the blank f124d0033014ffc_16 fill in the blank f124d0033014ffc_17 fill in the blank f124d0033014ffc_18 Income (Loss) $fill in the blank f124d0033014ffc_19 $fill in the blank f124d0033014ffc_20 $fill in the blank f124d0033014ffc_21 b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Make-or-Buy Decision

Direct materials	$27
Direct labor	16
Factory overhead (38% of direct labor)	6.08
Total cost per unit	$49.08

If Fremont 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 12% of the direct labor costs.

a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
September 30
	Make Carrying Case (Alternative 1)	Buy Carrying Case (Alternative 2)	Differential Effect on Income (Alternative 2)
Sales price	$fill in the blank f124d0033014ffc_1	$fill in the blank f124d0033014ffc_2	$fill in the blank f124d0033014ffc_3
Unit costs:
Purchase price	fill in the blank f124d0033014ffc_4	fill in the blank f124d0033014ffc_5	fill in the blank f124d0033014ffc_6
Direct materials	fill in the blank f124d0033014ffc_7	fill in the blank f124d0033014ffc_8	fill in the blank f124d0033014ffc_9
Direct labor	fill in the blank f124d0033014ffc_10	fill in the blank f124d0033014ffc_11	fill in the blank f124d0033014ffc_12
Variable factory overhead	fill in the blank f124d0033014ffc_13	fill in the blank f124d0033014ffc_14	fill in the blank f124d0033014ffc_15
Fixed factory overhead	fill in the blank f124d0033014ffc_16	fill in the blank f124d0033014ffc_17	fill in the blank f124d0033014ffc_18
Income (Loss)	$fill in the blank f124d0033014ffc_19	$fill in the blank f124d0033014ffc_20	$fill in the blank f124d0033014ffc_21

b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.

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