Show Me How Calculator Print Item Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $55 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 $25 Direct labor 19 Factory overhead (40% of direct labor) 7.6 Total cost per unit $51.6 If 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 the direct 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 decimal places. If an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Carrying Case Buy Carrying Case Differential Effects (Alternative 2) (Alternative 1) (Alternative 2) Unit costs: Purchase price 0 $51.6 x $51.6 x -25 25 Direct materials -19 19 Direct labor -2.66 2.66 Variable factory overhead -4.94 -4.94 Fixed factory overhead $-51.6 V $ -56.54 X -4.94X Total unit costs Feedback gation col plete tab Previous Next > Check My Work %24
Show Me How Calculator Print Item Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $55 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 $25 Direct labor 19 Factory overhead (40% of direct labor) 7.6 Total cost per unit $51.6 If 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 the direct 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 decimal places. If an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Carrying Case Buy Carrying Case Differential Effects (Alternative 2) (Alternative 1) (Alternative 2) Unit costs: Purchase price 0 $51.6 x $51.6 x -25 25 Direct materials -19 19 Direct labor -2.66 2.66 Variable factory overhead -4.94 -4.94 Fixed factory overhead $-51.6 V $ -56.54 X -4.94X Total unit costs Feedback gation col plete tab Previous Next > Check My Work %24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Show Me How
Calculator
Print Item
Make-or-Buy Decision
Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $55 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
$25
Direct labor
19
Factory overhead (40% of direct labor)
7.6
Total cost per unit
$51.6
If 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 the direct 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 decimal places. If an amount is zero, enter "0".
Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
April 30
Make
Carrying
Case
Buy
Carrying
Case
Differential
Effects
(Alternative 2)
(Alternative 1) (Alternative 2)
Unit costs:
Purchase price
0 $51.6
x $51.6 x
-25
25
Direct materials
-19
19
Direct labor
-2.66
2.66
Variable factory overhead
-4.94
-4.94
Fixed factory overhead
$-51.6
V $ -56.54 X
-4.94X
Total unit costs
Feedback
gation col
plete tab
Previous
Next
>
Check My Work
%24
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