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Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 per unit. The company, which is currently
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 354 of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials 527 Direct labor 22 Factory overhead (36% of direct labor) 2.92 Total cost per unit $56.92 If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and vartable factory overhead costs associated with the cases are expected to be 12% of the direct labor costs. a. Prepare a differential analysis dated September 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, entero' Use a minus sign to indicate a loss Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case Buy Carrying Case (Alternativa Differential Effect on Income (Alternative 2) Alternative 2) Sales price Unit costs: Purchase price OC Direct materials a. Prepare a differential analysis dated September 30 to stermine 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 To Use a minus sign to Indicate a loss Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case Buy Carrying Case (Alternative Differential Effect on Income (Alternative 1) 2) (Alternative 2) Sales price Unit costs: Purchase price Direct materials Direct labor Variable factory overhead Fixed factory overhead Income (Loss) to manufacture the carrying b. Assuming there were no better alternative uses for the spare capacity. It would cases. Fixed factory overhead is to this decision
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