Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $57 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 43% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials | $28 |
Direct labor | 22 |
Factory overhead (43% of direct labor) | 9.46 |
Total cost per unit | $59.46 |
If Fremont 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 September 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". Use a minus sign to indicate a loss.
Differential Analysis | |||
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) | |||
September 30 | |||
Make Carrying Case (Alternative 1) | Buy Carrying Case (Alternative 2) | Differential Effect on Income (Alternative 2) | |
Sales price | $ | $ | $ |
Unit costs: | |||
Purchase price | |||
Direct materials | |||
Direct labor | |||
Variable factory overhead | |||
Fixed factory overhead | |||
Income (Loss) | $ | $ | $ |
b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.
ANSWER
Differential Analysis | |||
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) | |||
Make Carrying Case (Alternative 1) | Buy Carrying Case (Alternative 2) | Differential Effect on Income (Alternative 2) | |
Sales price | 0 | 0 | 0 |
Unit costs: | |||
Purchase price | $57 | ($57 ) | |
Direct materials | 28 | 0 | 28 |
Direct labor | 22 | 0 | 22 |
Variable factory overhead (22*15%) | 3.3 | 0 | 3.3 |
Fixed factory overhead (22*28%) | 6.16 | 6.16 | 0 |
Income (loss) | $59.46 | $63.16 | ($3.7) |
b) Be advisable | |||
Irrelevant |
_____________________________________________
If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.
*****************THANK YOU**************
Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price...
Make-or-Buy Decision Fremont 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 overhead to production at the rate of 43% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 20 Direct labor Factory overhead (43% of direct labor) 8.6 Total cost per unit $52.6 If Fremont Computer...
Make-or-Buy Decision Fremont 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 overhead to production at the rate of 43% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 20 Factory overhead (43% of direct labor) 8.6 Total cost per unit $52.6 If Fremont Computer...
Make-or-Buy Decision Fremont 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 44% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 18 Factory overhead (44% of direct labor) 7.92 Total cost per un $52.92 If Fremont Computer...
Make-or-Buy Decision Fremont 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 37% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $30 Direct labor 20 Factory overhead (37% of direct labor) 7.4 Total cost per unit If Fremont Computer Company...
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $55 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 37% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $24 Direct labor 21 Factory overhead (37% of direct labor) 7.77 Total cost per unit $52.77 If Fremont Computer...
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 41% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $28 Direct labor 19 Factory overhead (41% of direct labor) 7.79 Total cost per unit $54.79 If Fremont Computer...
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $60 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 $28 Direct labor 19 Factory overhead (42% of direct labor) 7.98 Total cost per unit $54.98 If Fremont Computer...
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $62 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 $25 Direct labor 17 7.14 Factory overhead (42% of direct labor) $49.14 Total cost per unit If Fremont Computer...
Make-or-Buy Decision Fremont 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 44% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $27 Direct labor 18 Factory overhead (44% of direct labor) 7.92 Total cost per unit $52.92 If Fremont Computer...
Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials Direct labor Factory overhead (25% of direct labor) Total cost per unit If Fremont Computer Company manufactures the carrying...