Companion 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 44% of direct labor cost. The fully absorbed 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 Companion 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 14% of the direct labor costs. 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 required, round your answers to two decimal places. If an amount is zero, enter "0". 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 Income (Alternative 2) Sales Price $fill in the blank 591dfbfdb00000c_1 $fill in the blank 591dfbfdb00000c_2 $fill in the blank 591dfbfdb00000c_3 Costs: Purchase price $fill in the blank 591dfbfdb00000c_4 $fill in the blank 591dfbfdb00000c_5 $fill in the blank 591dfbfdb00000c_6 Direct materials per unit fill in the blank 591dfbfdb00000c_7 fill in the blank 591dfbfdb00000c_8 fill in the blank 591dfbfdb00000c_9 Direct labor per unit fill in the blank 591dfbfdb00000c_10 fill in the blank 591dfbfdb00000c_11 fill in the blank 591dfbfdb00000c_12 Variable factory overhead per unit fill in the blank 591dfbfdb00000c_13 fill in the blank 591dfbfdb00000c_14 fill in the blank 591dfbfdb00000c_15 Fixed factory overhead per unit fill in the blank 591dfbfdb00000c_16 fill in the blank 591dfbfdb00000c_17 fill in the blank 591dfbfdb00000c_18 Income (Loss) $fill in the blank 591dfbfdb00000c_19 $fill in the blank 591dfbfdb00000c_20 $fill in the blank 591dfbfdb00000c_21 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.

Companion 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 44% of direct labor cost. The fully absorbed 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 Companion 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 14% of the direct labor costs. 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 required, round your answers to two decimal places. If an amount is zero, enter "0". 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 Income (Alternative 2) Sales Price $fill in the blank 591dfbfdb00000c_1 $fill in the blank 591dfbfdb00000c_2 $fill in the blank 591dfbfdb00000c_3 Costs: Purchase price $fill in the blank 591dfbfdb00000c_4 $fill in the blank 591dfbfdb00000c_5 $fill in the blank 591dfbfdb00000c_6 Direct materials per unit fill in the blank 591dfbfdb00000c_7 fill in the blank 591dfbfdb00000c_8 fill in the blank 591dfbfdb00000c_9 Direct labor per unit fill in the blank 591dfbfdb00000c_10 fill in the blank 591dfbfdb00000c_11 fill in the blank 591dfbfdb00000c_12 Variable factory overhead per unit fill in the blank 591dfbfdb00000c_13 fill in the blank 591dfbfdb00000c_14 fill in the blank 591dfbfdb00000c_15 Fixed factory overhead per unit fill in the blank 591dfbfdb00000c_16 fill in the blank 591dfbfdb00000c_17 fill in the blank 591dfbfdb00000c_18 Income (Loss) $fill in the blank 591dfbfdb00000c_19 $fill in the blank 591dfbfdb00000c_20 $fill in the blank 591dfbfdb00000c_21 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.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....

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Question

Direct materials	$27
Direct labor	18
Factory overhead (44% of direct labor)	7.92
Total cost per unit	$52.92

If Companion 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 14% of the direct labor costs.

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 required, round your answers to two decimal places. If an amount is zero, enter "0". 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 Income (Alternative 2)
Sales Price	$fill in the blank 591dfbfdb00000c_1	$fill in the blank 591dfbfdb00000c_2	$fill in the blank 591dfbfdb00000c_3
Costs:
Purchase price	$fill in the blank 591dfbfdb00000c_4	$fill in the blank 591dfbfdb00000c_5	$fill in the blank 591dfbfdb00000c_6
Direct materials per unit	fill in the blank 591dfbfdb00000c_7	fill in the blank 591dfbfdb00000c_8	fill in the blank 591dfbfdb00000c_9
Direct labor per unit	fill in the blank 591dfbfdb00000c_10	fill in the blank 591dfbfdb00000c_11	fill in the blank 591dfbfdb00000c_12
Variable factory overhead per unit	fill in the blank 591dfbfdb00000c_13	fill in the blank 591dfbfdb00000c_14	fill in the blank 591dfbfdb00000c_15
Fixed factory overhead per unit	fill in the blank 591dfbfdb00000c_16	fill in the blank 591dfbfdb00000c_17	fill in the blank 591dfbfdb00000c_18
Income (Loss)	$fill in the blank 591dfbfdb00000c_19	$fill in the blank 591dfbfdb00000c_20	$fill in the blank 591dfbfdb00000c_21

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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