Pizana Computer Company has been purchasing carrying cases for its portable con to production at the rate of 44% of direct labor cost. The unit costs to produce com Direct materials $30.00 Direct labor 17.00 Factory overhead (44% of direct labor) 7.48 Total cost per unit 154.40 Pzana Computer Company manufactures the carrying cases, fixed factory overt a. Prepare a offerential analysis dated May 31 to determine whether the compan zero, enter "0" Differential Analysis

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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 Subject :- Accounting 

Make-or-Buy Decision
Pizena Computer Company has been purchesing carrying cases for its portable computers at a purchase price of $50 per unit. The company, which is currently operating below full capacity, charges factory overhead
to production at the rate of 44% of direct isbor cost. The unit costs to produce comparable carrying cases are expected to be as follows
Direct materials
$30.00
17.00
Direct labor
Factory overhead (44% of direct labor)
7.48
$54.40
Total cost per unit
If Pizans 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 director
costs
a. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Acternative 2) the carrying case. Round your answers to two decimal places it an amount
is 2010, enter "0"
Line Item Description
Unit costs
Differential Analysis
Make (Alt. 1) or Buy (Alt. 2) Carrying Case
May 31
Purchase price
Direct materials
Direct laber
Variable factory overhead
Fixed factory overhead
Total unit costs
Make Carrying Case Buy Carrying Case
(Alternative 1) (Alternative 2)
Differential Effects
(Alternative 2)
Transcribed Image Text:Make-or-Buy Decision Pizena Computer Company has been purchesing carrying cases for its portable computers at a purchase price of $50 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 44% of direct isbor cost. The unit costs to produce comparable carrying cases are expected to be as follows Direct materials $30.00 17.00 Direct labor Factory overhead (44% of direct labor) 7.48 $54.40 Total cost per unit If Pizans 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 director costs a. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Acternative 2) the carrying case. Round your answers to two decimal places it an amount is 2010, enter "0" Line Item Description Unit costs Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Purchase price Direct materials Direct laber Variable factory overhead Fixed factory overhead Total unit costs Make Carrying Case Buy Carrying Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2)
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