Make-or-Buy Decision Matchless 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 43% of direct labor cost. The fullly absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $29 Direct labor 22 Factory overhead (43 % of direct labor) 9.46 Total cost per unit $60.46 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 12% 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 Differential Effect Buy Carrying Case (Alternative 1) Case (Alternative 2) on Income (Alternative 2) Sales Price Costs: Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit be advisable Income (Loss) not be advisable 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
icon
Related questions
Question
100%
Make-or-Buy Decision
Matchless 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 43% of direct labor cost. The fullly absorbed unit costs to produce comparable carrying cases are
expected to be as follows:
Direct materials
$29
Direct labor
22
Factory overhead (43 % of direct labor)
9.46
Total cost per unit
$60.46
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 12% 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
Differential Effect
Buy Carrying
Case (Alternative 1) Case (Alternative 2) on Income (Alternative 2)
Sales Price
Costs:
Purchase price
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Transcribed Image Text:Make-or-Buy Decision Matchless 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 43% of direct labor cost. The fullly absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $29 Direct labor 22 Factory overhead (43 % of direct labor) 9.46 Total cost per unit $60.46 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 12% 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 Differential Effect Buy Carrying Case (Alternative 1) Case (Alternative 2) on Income (Alternative 2) Sales Price Costs: Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit
be advisable
Income (Loss)
not be advisable
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.
Transcribed Image Text:be advisable Income (Loss) not be advisable 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.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education