Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 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 $26.00
Direct labor 18.00
Factory overhead (44% of direct labor) 7.92
Total cost per unit $51.92
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 14% of the direct labor costs.
Question Content Area
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 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
Case (Alternative 1) Buy Carrying
Case (Alternative 2) Differential Effects
(Alternative 2)
Unit costs:
Purchase price $fill in the blank 069a0dfeafa8021_1
0
$fill in the blank 069a0dfeafa8021_2
56.00
$fill in the blank 069a0dfeafa8021_3
56.00
Direct materials per unit fill in the blank 069a0dfeafa8021_4
26.00
fill in the blank 069a0dfeafa8021_5
0
fill in the blank 069a0dfeafa8021_6
26.00
Direct labor per unit fill in the blank 069a0dfeafa8021_7
18.00
fill in the blank 069a0dfeafa8021_8
0
fill in the blank 069a0dfeafa8021_9
18.00
Variable factory overhead per unit fill in the blank 069a0dfeafa8021_10
2.52
fill in the blank 069a0dfeafa8021_11
0
fill in the blank 069a0dfeafa8021_12
2.52
Fixed factory overhead per unit fill in the blank 069a0dfeafa8021_13
5.40
fill in the blank 069a0dfeafa8021_14
5.40
fill in the blank 069a0dfeafa8021_15
5.40
Total unit costs $fill in the blank 069a0dfeafa8021_16
51.92
$fill in the blank 069a0dfeafa8021_17
50.60
$fill in the blank 069a0dfeafa8021_18
1.32
