Make-or-Buy Decision Pizana 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 t 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 $30.00 Direct labor 21.00 Factory overhead (37% of direct labor) 7.77 $58.77 Total cost per unit If Pizana 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 16% of the direct labor costs. a. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your answers to two decimal places. If an amount is zero, enter "0". Line Item Description Unit costs: Purchase price Direct materials Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Direct labor Variable factory overhead Fixed factory overhead Total unit costs Make Carrying Case Buy Carrying Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2)
Make-or-Buy Decision Pizana 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 t 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 $30.00 Direct labor 21.00 Factory overhead (37% of direct labor) 7.77 $58.77 Total cost per unit If Pizana 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 16% of the direct labor costs. a. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your answers to two decimal places. If an amount is zero, enter "0". Line Item Description Unit costs: Purchase price Direct materials Differential Analysis Make (Alt. 1) or Buy (Alt. 2) Carrying Case May 31 Direct labor Variable factory overhead Fixed factory overhead Total unit costs Make Carrying Case Buy Carrying Case (Alternative 1) (Alternative 2) Differential Effects (Alternative 2)
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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Homework help. Chapter 25, number 5. Need help filling in the blanks. Thank you!
Transcribed Image Text:Make-or-Buy Decision
Pizana 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 37% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:
$30.00
21.00
7.77
$58.77
If Pizana 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 16% of the direct labor
costs.
Direct materials
Direct labor
Factory overhead (37% of direct labor)
Total cost per unit
a. Prepare a differential analysis dated May 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. Round your answers to two decimal places. If an amount
is zero, enter "0".
Line Item Description
Unit costs:
Differential Analysis
Make (Alt. 1) or Buy (Alt. 2) Carrying Case
May 31
Purchase price
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
Total unit costs
Make Carrying Case Buy Carrying Case
(Alternative 1)
(Alternative 2)
$
Differential Effects
(Alternative 2)
QO0000
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