Make$-$or$-$Buy Decision

Companion Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $$55$ per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of $46\%$ of direct labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials $$26\mathrm{.}00$

Direct labor $16\mathrm{.}00$

Factory overhead $(46\%$ of direct labor$)7\mathrm{.}36$

Total cost per unit $$49\mathrm{.}36$

If Companion 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.

Question Content Area

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 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.