1. Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $61 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	$26
Direct labor	21
Factory overhead (42% of direct labor)	8.82
Total cost per unit	$55.82

If Matchless 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.

a. Prepare a differential analysis dated February 24 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". 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 Effect on Income (Alternative 2)
Sales Price	$	$	$
Costs:
Purchase price	$	$	$
Direct materials per unit
Direct labor per unit
Variable factory overhead per unit
Fixed factory overhead per unit
Income (Loss)	$	$	$

Feedback

a. For the make and buy alternatives provide the unit costs. Use percentage to separate variable and fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2.

b. Assuming there were no better alternative uses for the spare capacity, it would be advisable to manufacture the carrying cases. Fixed factory overhead is irrelevant to this decision.

2. Jackson Lumber Company incurs a cost of $374 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $564 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $522 per hbf, which can be sold for $750 per hbf.

Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Decision on Accepting Additional Business

Brightstone Tire and Rubber Company has capacity to produce 281,000 tires. Brightstone presently produces and sells 215,000 tires for the North American market at a price of $106 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 33,000 tires for $85.7 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

Direct materials	$40
Direct labor	15
Factory overhead (60% variable)	24
Selling and administrative expenses (30% variable)	21
Total	$100

Brightstone pays a selling commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $6 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $184,800.

a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. If an amount is zero, enter zero "0". If required, round interim calculations to two decimal places.

Differential Analysis
Reject Order (Alt. 1) or Accept Order (Alt. 2)
January 21
	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$0	$2,828,100	$ 2,828,100
Costs:	0
Direct materials	0	1,320,000	1,320,000
Direct labor	0	495000	495000
Variable factory overhead	0
Variable selling and admin. expenses	0
Shipping costs	0	198000	198000
Certification costs	0	184800	184800
Income (Loss)	$0	$	$

Differential Analysis
Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2)
August 9
	Sell Rough-Cut (Alternative 1)	Process Further into Finished Cut (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues, per 100 board ft.	$	$	$
Costs, per 100 board ft.
Income (Loss), per 100 board ft.	$	$	$

Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative Accept the special order

b. What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places. $ per unit