Make-or-Buy Decision Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 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 fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $28 21 Direct labor Factory overhead (46% of direct labor) 9.66 Total cost per unit $58.66 If Matchless 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 16% of the direct labor costs. a. Prepare a differential analysis dated February 24 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 "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 Buy Carrying Differential Effect Case (Alternative 1) Case (Alternative 2) on Income (Alternative 2) Sales Price Costs: Purchase price 0 $ 60 X $C-60 Direct materials per unit 28 x Direct labor per unit Variable factory overhead per unit 14,436 X Fixed factory overhead per unit 52,164 X Income (Loss) Feedback Check My Work a. For the make and buy alternatives provide the unit costs. Use percentage to separate variable and fixed costs. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. b. Assuming there were no better alternative uses for the spare capacity, it would be advisable to manufacture the carrying cases. Fixed factory overhead is irrelevant to this decision. Feedback