Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of 562 per unit. The company, which

image text in transcribed
image text in transcribed
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of 562 per unit. The company, which is currently operating below capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 17 Factory overhead (40% of direct labor) 6.B Total cost per unit 550.5 If Fremont Computer Company manufactures the carrying cases, foxed factory overtrend costs will not include and wariable factory overhead costs associated with the cases are expected to be 14% ot 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 cose. If weit, round your answers to two decimal places. If an amount is zero enter "o"Use a munussion to indicate a loss Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case (Alternative 1) Duy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales pece Unit costs Purchase price Direct materials Direct labor Variable factory overhead Foxed factory overhead 6.8 Factory overhead (40% of direct labor) Total cost per unit $50.8 If Fremont Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the expected to be 14% 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 } the carrying car. I w answers to two decimal places. If an amount is zero, enter"0" Use a minus sign to indicate a los Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. ) September 30 Differential Effect on Income (Alternative 2) Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Sales price Unit costs Purchase price Direct materials Direct labor Variable factory overhead Fixed factory overhead Income (Loss) to manufacture the carrying caused factory overheads b. Assuming there were no better alternative uses for the spare capacity, it would to this decision

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Management In Organizations An Integrated Case Study Approach

Authors: Margaret Woods

1st Edition

0415591732, 9780415591737

More Books

Students also viewed these Accounting questions