21 8.61 Make-or-Buy Decision Somerset 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 41% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $26 Direct labor Factory overhead (41% of direct labor) Total cost per unit $55.61 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 15% 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 "O". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Buy Carrying Carrying Case Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Unit costs: Purchase price Direct materials Direct labor Variable factory overhead Fived factor warhead 21 8.61 Direct labor Factory overhead (41% of direct labor) Total cost per unit $55.61 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 15% 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 "o". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Buy Carrying Carrying Case Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Unit costs: Purchase price Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit costs to manufacture the b. Assuming there were no better alternative uses for the spare capacity, it would carrying cases. Fixed factory overhead is to this decision. Process or Sell Product 319 is produced for $3.50 per gallon. Product J19 can be sold without additional processing for $4.19 per gallon, or processed further into Product R33 at an additional cost of $0.40 per gallon. Product R33 can be sold for $4.30 per gallon. a. Prepare a differential analysis dated April 30 on whether to sell Product 319 (Alternative 1) or process further into Product R33 (Alternative 2). Round your answers to the nearest cent. If required, use a minus sign to indicate a loss. Differential Analysis Sell Product 319 (Alt. 1) or Process Further into Product R33 (Alt. 2) April 30 Process Sell Differential Further into Product 319 Effects Product R33 (Alternative 1) (Alternative 2) (Alternative 2) Revenues, per unit Costs, per unit Profit (loss), per unit b. Should Product 319 be sold (Alternative 1) or processed further into Product R33 (Alternative 2)