Make-or-Buy DecisionSomerset 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 factoryoverhead to production at the rate of 45% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:Direct materials$27Direct labor16Factory overhead (45% of direct labor)7.2Total cost per unit$50.2If Somerset 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 thedirect labor costs.a. Prepare a differential analysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimalplaces. If an amount is zero, enter "0".Differential AnalysisMake Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)April 30MakeBuyCarryingCarryingDifferentialCaseCaseEffects(Alternative 1) (Alternative 2)(Alternative 2)Unit costs:Purchase priceDirect materialsDirect laborVariable factory overheadFixed factory overheadTotal unit costs

Differential analysis (also known as incremental analysis) is a management accounting technique in…

Answered: omerset Computer Company has been…

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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Diamond Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $84 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 50% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $56 Direct labor 20 Factory overhead (50% of direct labor) 10 Total cost per unit $86 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 10% of the direct labor costs. Required: A. Prepare a differential analysis, dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text…
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:Cost Driver Dollar Amount per UnitDirect materials $15Direct labor 20Factory overhead (25% of direct labor) 5Total cost per unit 40If 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 5% 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. b. Based on the data presented, would it be advisable to make the carrying cases or to continue buying them? Explain in your own words.
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 46% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 16 Factory overhead (46% of direct labor) 7.36 Total cost per unit $47.36 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 13% of the direct labor costs. Question Content Area 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…
Make-or-Buy Decision Companion Technologies Company has been purchasing carrying cases for its portable tablets at a delivered cost of $57 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 42% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor $24.00 21.00 Factory overhead (42% of direct labor). Total cost per unit 8.82 $53.82 < If Companion Technologies 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 report for the make-or-buy decision. Enter your final answer as a positive amount if it represents a net cost savings; enter a negative amount if it represents an increase in cost. COMPANION TECHNOLOGIES COMPANY Manufacture Carrying…
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $78 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 unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $52 Direct labor 20 Factory overhead (40% of direct labor) 8 Total cost per unit $80 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 10% of the direct labor costs. Required: a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those…
The make or buy decision Lakeview Engine Inc. produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Lakeview. The supplier will charge Lakeview $270 per engine for the set of parts. Lakeview's current costs for those part sets are direct materials, $160; direct labor, $80; and manufacturing overhead applied at 100% of direct labor. Variable manufacturing overhead is considered to be 20% of the total, and fixed overhead will not change if the part sets are acquired from the outside supplier. bd 1200 Required: Should Lakeview Engine continue to make the part sets or accept the offer to purchase them for $270? Ovin
You make widgets, which is a subassembly for you main product of whatsup. An outside vendor has provided you with a quote to supply the widget part for $ 72.00 per unit Your cost records show the following: Your projected production for the widget is 12,500 units Item of Cost Per Unit Cost Direct Material $18.75 Direct Labor $38.00 Variable manufacturing overhead $9.25 Lease on manufacturing facility $36,000.00 per year Depreciation of equipment $2.50 Allocated Corporate Expenses $1.25 If this offer is accepted, you can sublease the manufacturing facility for $15,000 per year All direct and variable costs can be avoided. The equipment has no salvage value How much would net operating income be changed if the outside supplier offer was accepted? Show all calculations for full credit
The machining division of Cullumber International has a capacity of 2,000 units. Its sales and cost data are: Selling price per unit $80 Variable manufacturing costs per unit 25 Variable selling costs per unit 3 Total fixed manufacturing overhead 183,200 The machining division is currently selling 1,800 units to outside customers, and the assembly division of Cullumber International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If Cullumber's assembly division is currently buying from an outside supplier at $75 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price? The company profits would by $
Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $58 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 44% of direct labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $28.00 Direct labor 17.00 Factory overhead (44% of direct labor) 7.48 Total cost per unit $52.48 If Companion 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 February 24 to determine whether the company should Make Carrying Case (Alternative 1) or Buy Carrying Case (Alternative 2). If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes in which you…
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Muspest Supplies is currently evaluating the cost of manufacturing some of the components utilised in their products. Currently the company expects to need 6 000 parts each month. A supplier of the part has been identified and the total cost of purchasing the parts on a monthly basis would be $97 000. In analysing the part costs, the direct labour and materials cost would be $64 000 and the variable overheads would be $22 000.Based only on the relevant cost per unit, which would be the preferred option of Muspest Supplies?HD EDUCATIONA. Unit costs to produce the part would be $14.33 with the unit cost to purchase of $ 16.17. In this case, the best option would be to commence purchasing the part.B. Unit costs to produce the part would be $10.67 with the unit cost to purchase of $ 16.17. In this case, the best option would be to continue to make the part.C. None of the other answers D. Unit costs to produce the part would be $14.33 with the unit cost to purchase of $ 16.17. In this case,…

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