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eBook Show Me How Print Item Question Content Area Make-or-Buy Decision Pizana Computer Company has been purchasing carrying cases for its portable computers at a
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Make-or-Buy Decision
Pizana 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 39% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:
Line Item Description | Amount |
---|---|
Direct materials | $28.00 |
Direct labor | 19.00 |
Factory overhead (39% of direct labor) | 7.41 |
Total cost per unit | $54.41 |
If Pizana 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 12% of the direct labor costs.
a. Prepare a differential analysis dated August 31 to determine if Socks should be continued (Alternative 1) or discontinued (Alternative 2 ). If an amount is zero, enter "0". If required, use a minus sign to indicate a lossStep by Step Solution
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