Make-or-Buy Decision

Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 36% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials	$29
Direct labor	19
Factory overhead (36% of direct labor)	6.84
Total cost per unit	$54.84

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 16% 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".

Differential Analysis
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)
April 30
	Make Carrying Case (Alternative 1)	Buy Carrying Case (Alternative 2)	Differential Effects (Alternative 2)
Unit costs:
Purchase price	$fill in the blank 7832cb07e026feb_1	$fill in the blank 7832cb07e026feb_2	$fill in the blank 7832cb07e026feb_3
Direct materials	fill in the blank 7832cb07e026feb_4	fill in the blank 7832cb07e026feb_5	fill in the blank 7832cb07e026feb_6
Direct labor	fill in the blank 7832cb07e026feb_7	fill in the blank 7832cb07e026feb_8	fill in the blank 7832cb07e026feb_9
Variable factory overhead	fill in the blank 7832cb07e026feb_10	fill in the blank 7832cb07e026feb_11	fill in the blank 7832cb07e026feb_12
Fixed factory overhead	fill in the blank 7832cb07e026feb_13	fill in the blank 7832cb07e026feb_14	fill in the blank 7832cb07e026feb_15
Total unit costs	$fill in the blank 7832cb07e026feb_16	$fill in the blank 7832cb07e026feb_17	$fill in the blank 7832cb07e026feb_18