Make-or-Buy Decision Pizana 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 45% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor $29.00 21.00 Factory overhead (45% of direct labor) 9.45 Total cost per unit $59.45 < 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. 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". Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Line Item Description (Alternative 2) Make Carrying Case Buy Carrying Case Differential Effects (Alternative 1) (Alternative 2) Unit costs: Purchase price 60 Direct materials 29 60 29 Direct labor 21 21 Variable factory overhead 5 X 5 X Fixed factory overhead Total unit costs 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 Feedback Check My Work b. Which alternative has the most desirable effect on income? to manufacture the carrying cases. Fixed factory overhead is to this decision.