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 39% of direct labor cost. The total unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials	$26.00
Direct labor	22.00
Factory overhead (39% of direct labor)	8.58
Total cost per unit	$56.58

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 14% of the direct labor costs.

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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.

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 6b90710a5fc8fd6_1	$fill in the blank 6b90710a5fc8fd6_2	$fill in the blank 6b90710a5fc8fd6_3
Direct materials per unit	fill in the blank 6b90710a5fc8fd6_4	fill in the blank 6b90710a5fc8fd6_5	fill in the blank 6b90710a5fc8fd6_6
Direct labor per unit	fill in the blank 6b90710a5fc8fd6_7	fill in the blank 6b90710a5fc8fd6_8	fill in the blank 6b90710a5fc8fd6_9
Variable factory overhead per unit	fill in the blank 6b90710a5fc8fd6_10	fill in the blank 6b90710a5fc8fd6_11	fill in the blank 6b90710a5fc8fd6_12
Fixed factory overhead per unit	fill in the blank 6b90710a5fc8fd6_13	fill in the blank 6b90710a5fc8fd6_14	fill in the blank 6b90710a5fc8fd6_15
Total unit costs	$fill in the blank 6b90710a5fc8fd6_16	$fill in the blank 6b90710a5fc8fd6_17	$fill in the blank 6b90710a5fc8fd6_18

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