Make$-$or$-$Buy Decision

Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $$62$ 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 $$24\mathrm{.}00$

Direct labor $19\mathrm{.}00$

Factory overhead $(39\%$ of direct labor$)7\mathrm{.}41$

Total cost per unit $$50\mathrm{.}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 $15\%$ of the direct labor costs.

Question Content Area

a$.$ Prepare a differential analysis dated May $31$ to determine whether the company should make $($Alternative $1)$ or buy $($Alternative $2)$ the carrying case. Round your answers to two decimal places. If an amount is zero, enter $"0".$