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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 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 Direct labor Factory overhead (40% of direct labor) Total cost per unit. If Diamond 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 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 Sales Price Costs: $35.00 18.00 7.20 $60.20 Purchase price Direct materials per unit Direct labor per unit. Variable factory overhead per unit Fixed factory overhead per unit Income (Loss) Make Carrying Buy Carrying Case (Alternative 1) Case (Alternative 2) 000000 Differential Effect on Costs (Alternative 2)

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 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 Direct labor Factory overhead (40% of direct labor) Total cost per unit. If Diamond 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 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 Sales Price Costs: $35.00 18.00 7.20 $60.20 Purchase price Direct materials per unit Direct labor per unit. Variable factory overhead per unit Fixed factory overhead per unit Income (Loss) Make Carrying Buy Carrying Case (Alternative 1) Case (Alternative 2) 000000 Differential Effect on Costs (Alternative 2)

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 7E: Make-or-buy decision Somerset Computer Company has been purchasing carrying cases for its portable...
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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 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 Direct labor Factory overhead (40% of direct labor) Total cost per unit Sales Price Costs: Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit Income (Loss) If Diamond 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 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 Aina thana $35.00 18.00 hatta 7.20 $60.20 Make Carrying Buy Carrying Case (Alternative 1) Case (Alternative 2) QO0000 fan tha Differential Effect on Costs (Alternative 2) 000000 000000 ild .ft.RG the rund faham La LL: decisio
Transcribed Image Text: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 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 Direct labor Factory overhead (40% of direct labor) Total cost per unit Sales Price Costs: Purchase price Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit Income (Loss) If Diamond 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 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 Aina thana $35.00 18.00 hatta 7.20 $60.20 Make Carrying Buy Carrying Case (Alternative 1) Case (Alternative 2) QO0000 fan tha Differential Effect on Costs (Alternative 2) 000000 000000 ild .ft.RG the rund faham La LL: decisio
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