Make-or-Buy Decision Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $62 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 fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 22 Factory overhead (39% of direct labor) 8.58 Total cost per unit $54.58 If Matchless 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 14% of the direct labor costs. a. Prepare a differential analysis dated February 24 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". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) February 24 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales Price $fill in the blank 5b0bf4003fe8034_1 $fill in the blank 5b0bf4003fe8034_2 $fill in the blank 5b0bf4003fe8034_3 Costs: Purchase price $fill in the blank 5b0bf4003fe8034_4 $fill in the blank 5b0bf4003fe8034_5 $fill in the blank 5b0bf4003fe8034_6 Direct materials per unit fill in the blank 5b0bf4003fe8034_7 fill in the blank 5b0bf4003fe8034_8 fill in the blank 5b0bf4003fe8034_9 Direct labor per unit fill in the blank 5b0bf4003fe8034_10 fill in the blank 5b0bf4003fe8034_11 fill in the blank 5b0bf4003fe8034_12 Variable factory overhead per unit fill in the blank 5b0bf4003fe8034_13 fill in the blank 5b0bf4003fe8034_14 fill in the blank 5b0bf4003fe8034_15 Fixed factory overhead per unit fill in the blank 5b0bf4003fe8034_16 fill in the blank 5b0bf4003fe8034_17 fill in the blank 5b0bf4003fe8034_18 Income (Loss) $fill in the blank 5b0bf4003fe8034_19 $fill in the blank 5b0bf4003fe8034_20 $fill in the blank 5b0bf4003fe8034_21 Feedback 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.
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.
Make-or-Buy Decision
Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $62 per unit. The company, which is currently operating below full capacity, charges factory
| Direct materials | $24 |
| Direct labor | 22 |
| Factory overhead (39% of direct labor) | 8.58 |
| Total cost per unit | $54.58 |
If Matchless Computer Company manufactures the carrying cases, fixed
a. Prepare a differential analysis dated February 24 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". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) | |||
| February 24 | |||
| Make Carrying Case (Alternative 1) |
Buy Carrying Case (Alternative 2) |
Differential Effect on Income (Alternative 2) |
|
| Sales Price | $fill in the blank 5b0bf4003fe8034_1 | $fill in the blank 5b0bf4003fe8034_2 | $fill in the blank 5b0bf4003fe8034_3 |
| Costs: | |||
| Purchase price | $fill in the blank 5b0bf4003fe8034_4 | $fill in the blank 5b0bf4003fe8034_5 | $fill in the blank 5b0bf4003fe8034_6 |
| Direct materials per unit | fill in the blank 5b0bf4003fe8034_7 | fill in the blank 5b0bf4003fe8034_8 | fill in the blank 5b0bf4003fe8034_9 |
| Direct labor per unit | fill in the blank 5b0bf4003fe8034_10 | fill in the blank 5b0bf4003fe8034_11 | fill in the blank 5b0bf4003fe8034_12 |
| Variable factory overhead per unit | fill in the blank 5b0bf4003fe8034_13 | fill in the blank 5b0bf4003fe8034_14 | fill in the blank 5b0bf4003fe8034_15 |
| Fixed factory overhead per unit | fill in the blank 5b0bf4003fe8034_16 | fill in the blank 5b0bf4003fe8034_17 | fill in the blank 5b0bf4003fe8034_18 |
| Income (Loss) | $fill in the blank 5b0bf4003fe8034_19 | $fill in the blank 5b0bf4003fe8034_20 | $fill in the blank 5b0bf4003fe8034_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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