Managerial Accounting (ACCO 504):

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Exercise 25-7 Name: Section: Score: 0% Key Code: [Key code here] Instructions 9 Answers are entered in the cells with gray backgrounds. 10 Cells with non-gray backgrounds are protected and cannot be edited. 11 An asterisk (") will appear to the right of an incorrect entry. 12 Enter a zero in cells you would otherwise leave blank. 13 14 a. Differential Analysis 15 Make or Buy Carrying Case 16 July 19 17 Make Carrying Buy Carrying Differential Effect 18 Case Case on Income (Alternative 1) (Alternative 2) (Alternative 2) 19 20 Costs: 21 Purchase price 22 Direct materials per unit 23 Direct labor per unit 24 Variable factory overhead per unit 25 Fixed factory overhead per unit 26 Income (loss) 27 28 29 b. 30 Assuming there are no better uses for the spare capacity, 32 the carrying cases should be since costs per unit 35 34 would by by doing so. 35 36 The fixed factory overhead is to the decision. 37 38 39 40 41 42 43 44 45 46 A7 Ex. 25-7 + ListoIf Jupiter 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 July 19 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Answer + b. On the basis of the data presented, would it be advisable to make the carry- ing cases or to continue buying them? Explain.W Make-orbuy decision upiter Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $70 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable ; carrying cases are expected to be as follows: its, s i Direct materials 545 Direct labor 2!] Factory overhead (40% ofdirect labor) Total cost per unit |\"| u w an