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Make-or-Buy Decision

Sapphire Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $89 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 total unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials	$53.00
Direct labor	26.00
Factory overhead (40% of direct labor)	10.40
Total cost per unit	$89.40

If Sapphire 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 February 24 to determine whether the company should Make Carrying Case (Alternative 1) or Buy Carrying Case (Alternative 2). If an amount is zero, enter "0". If required, round your answers to two decimal places. 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 1cd657fdf02d072_1	$fill in the blank 1cd657fdf02d072_2	$fill in the blank 1cd657fdf02d072_3
Direct materials per unit	fill in the blank 1cd657fdf02d072_4	fill in the blank 1cd657fdf02d072_5	fill in the blank 1cd657fdf02d072_6
Direct labor per unit	fill in the blank 1cd657fdf02d072_7	fill in the blank 1cd657fdf02d072_8	fill in the blank 1cd657fdf02d072_9
Variable factory overhead per unit	fill in the blank 1cd657fdf02d072_10	fill in the blank 1cd657fdf02d072_11	fill in the blank 1cd657fdf02d072_12
Fixed factory overhead per unit	fill in the blank 1cd657fdf02d072_13	fill in the blank 1cd657fdf02d072_14	fill in the blank 1cd657fdf02d072_15
Total unit costs	$fill in the blank 1cd657fdf02d072_16	$fill in the blank 1cd657fdf02d072_17	$fill in the blank 1cd657fdf02d072_18