Question

Instructions Labels and Amount Descriptions Differential Analysis Final Question Instructions Jupiter Computer Compary has been purchasing carrying cases for its portable computers at a purchase price of $81 per unit. The company, which is currently operating below tul capacity charges factory overhead to production at the rate of 60% of direct labor cost. They absorbed unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $51 Direct labor Factory overhead (60% of direct labor) 12 Total cost per unit t ed with the cases are expected to If Jupher Computer Company manufactures the carrying cases, food factory overhead costs will not increase and variable factory overhead con be 10% of the direct labor costs Required: A Prepare a different dated Ay 19 to determine whether the company should make ( A matve 1) or buy Alemate the carrying case. Refer to the ots of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those bones in which you must enter subtracted or negative numbers use a minus in there is no amount or an amount is enter to A colon () wil omatically ander ruired 8. On the basis of the data presented would be advisable to make the carrying care o con buying them? Epla

Answer 1

differential analysis

	make carrying cost	buy carrying case	differential effect on income
direct material per unit	51		51
direct labor per unit	20		20
variable factory overhead per unit	2[20*10%]		2
purchase price		81	(81)
differential	73	81	(8)

it would be beneficial to make carrying case because cost savings would be $8

fixed factory overhead is irrelevant as it will continue to occur whether case are purchase or made