Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Make-or-Buy Decision
Diamond 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
Direct materials | $35.00 |
Direct labor | 18.00 |
Factory overhead (40% of direct labor) | 7.20 |
Total cost per unit | $60.20 |
If Diamond Computer Company manufactures the carrying cases, fixed
a. Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis | |||
Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) | |||
February 24 | |||
Make Carrying Case (Alternative 1) |
Buy Carrying Case (Alternative 2) |
Differential Effect on Costs (Alternative 2) |
|
Sales Price | $fill in the blank | $fill in the blank | $fill in the blank |
Costs: | |||
Purchase price | $fill in the blank | $fill in the blank | $fill in the blank |
Direct materials per unit | fill in the blank | fill in the blank | fill in the blank |
Direct labor per unit | fill in the blank | fill in the blank | fill in the blank |
Variable factory overhead per unit | fill in the blank | fill in the blank | fill in the blank |
Fixed factory overhead per unit | fill in the blank | fill in the blank | fill in the blank |
Income (Loss) | $fill in the blank | $fill in the blank | $fill in the blank |
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.
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