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Maker-or-Buy Decision Puzana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which
Maker-or-Buy Decision Puzana Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $59 per unit. The company, which is currently operating below full capacity, charges factory verhead 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 duct labor) Total cost per unit $24.00 21.00 9.24 $54.24 It 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 10% 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 zero, enter "0" Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case Line Item Description May 31 Make Carrying Case Bay Carrying Case Differential Effects (Alternative 1) (Alternative) (Alternative 2) Unit costs Purchase price D Dired materials 24 Direct labor Variable factory overfiead 136 24 21 1.36 LOOB Unit costs Purchase price Direct materials 24 " 34 Direct labor 21 0 Variable factory overhead 336 0 134 Fixed factory overhead san Total unit costs 5424 V Check My b. Assuming there were no better alternative uses for the spare capacity, it would fic advisable to manufacture the carrying cases Fixed factory overhead is irrelevant to this decision
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