Make-or-Buy Decision

Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $58 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 42% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials	$29
Direct labor	20
Factory overhead (42% of direct labor)	8.4
Total cost per unit	$57.4

If Somerset 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 13% of the direct labor costs.

a. Prepare a differential analysis dated April 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 "0".

Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $58 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 42% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials 529 Direct labor 20 Factory overhead (42% of direct labor) 8.4 Total cost per unit $57.4 If Somerset 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 13% of the direct labor costs. a. Prepare a differential analysis dated April 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"O". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Buy Carrying Carrying Case Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Unit costs: Purchase price Direct materials Direct labor Variable factory overhead ni Fixed factory overhead Total unit costs $