Make-or-Buy Decision Fremont 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 44% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (44% of direct labor) Total cost per unit If Fremont 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. $28 21 $58.24 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, enter ". Use a minus sign to indicate a loss Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) Make Carrying Case Buy Carrying Case Differential Effect on Income Sales price Unit costs Purchase price Direct materials Direct labor Variable factory 2.94 X Fixed factory overhead Income (Lass Feedback Chack My Work a. For the make and buy altermatives provide the unit costs. Use percentage to separate variable and fioxed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1 Learning Objective 1 b.Assuming there were no better alternative uses for the spare capacity, it would be advisable manufacture the carrying cases.Fixed factory overhead is irrelevantto this decision to Make-or-Buy Decision Fremont 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 44% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (44% of direct labor) Total cost per unit If Fremont 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. $28 21 $58.24 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, enter ". Use a minus sign to indicate a loss Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) Make Carrying Case Buy Carrying Case Differential Effect on Income Sales price Unit costs Purchase price Direct materials Direct labor Variable factory 2.94 X Fixed factory overhead Income (Lass Feedback Chack My Work a. For the make and buy altermatives provide the unit costs. Use percentage to separate variable and fioxed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1 Learning Objective 1 b.Assuming there were no better alternative uses for the spare capacity, it would be advisable manufacture the carrying cases.Fixed factory overhead is irrelevantto this decision to
