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40 Ch 24 Make or Buy Scenario (3 polnts) Eclipse Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $86 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: Direct Materials $30 Direct Labor Factory Overhead (40% of direct labor) 16 Total cost per unit $86 If Eclipse Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory costs associated with the cases are expected to be 15% of the direct labor costs. Prepare a differential analysis, dated July 19, 2014, to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying cases. I have completed the first line for you, please fill in the rest. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) July 19, 2014 Make Buy Differential Carrying Case Carrying Case Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) Costs: Purchase Price | $ 0.00 S -86.00 $ -86.00 DirectMaterials dt - 30 30 Pred labor Per urut - 40 O 4 O Narvalde factory Dverhaodtunit-6 O Fixed factus u Overhaod Mt - 10 - IO - 96 |Income (Loss) s - lo O Is -86 *2. (1 Point) The unfavorable volume variance may be due to all of the following factors except: O a. Failure to obtain enough sales orders. O b. Unexpected increases in the cost of utilities. O G. Failure to maintain an even flow of work hi O d. Machine breakdowns. "3. (2 Points) Total costs (fixed and variable) for manufacturing 15,000 units was $4,500,000. a) What is the cost per unit? (1 point) If the company wants to each 15% return on its $18,000,000 investment, what is the markup per unit? (1 point)