I need the answer as soon as possible 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 factory overhead to production at the rate of 40% of direct labor cost. The unit costs toproduce comparable carrying cases are expected to be as follows:Direct materials$30Direct labor20Factory overhead (40% of direct labor)8Total cost per unit$58If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overheadcosts associated with the cases are expected to be 13% 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) thecarrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0".Differential AnalysisMake Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)April 30BuyCarryingMakeCarryingDifferentialCaseCaseEffects(Alternative 1) (Alternative 2)(Alternative 2)Unit costs:Purchase priceDirect materialsDirect laborVariable factory overheadFixed factory overheadTotal unit coststo manufacture the carrying cases.b. Assuming there were no better alternative uses for the spare capacity, it wouldto this decision.Fixed factory overhead is

Solution a: A differential analysis is based on comparing the relevant cost of making the product…

Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 p which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor produce comparable carrying cases are expected to be as follows: Direct materials $30 Direct labor 20 Factory overhead (40% of direct labor) 8. Total cost per unit $58 If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and varia costs associated with the cases are expected to be 13% of the direct labor costs.

Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 p which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor produce comparable carrying cases are expected to be as follows: Direct materials $30 Direct labor 20 Factory overhead (40% of direct labor) 8. Total cost per unit $58 If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and varia costs associated with the cases are expected to be 13% of the direct labor costs.

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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