Make-or-Buy DecisionSomerset Computer Company has been purchasingcarrying cases for its portable computers at a purchaseprice of $58 per unit. The company, which is currentlyoperating below full capacity, charges factory overhead toproduction at the rate of 44% of direct labor cost. The unitcosts to produce comparable carrying cases are expected tobe as follows:Direct materialsDirect laborFactory overhead (44% of direct labor)Total cost per unitIf Somerset Computer Company manufactures the carryingcases, fixed factory overhead costs will not increase andvariable factory overhead costs associated with the casesare expected to be 12% of the direct labor costs.$28198.36a. Prepare a differential analysis dated April 30 todetermine whether the company should make (Alternative1) or buy (Alternative 2) the carrying case. If required,round your answers to two decimal places. If anamount is zero, enter "0".Unit costs:$55.36Differential AnalysisMake Carrying Case (Alt. 1) or Buy CarryingCase (Alt. 2)April 30Purchase priceDirect materialsDirect laborVariable factory overheadFixed factory overheadTotal unit costsMakeBuyCarryingCarryingCaseCase(Alternative 1) (Alternative 2)DifferentialEffects(Alternative 2)carrying cases. Fixed factory overhead isthis decision.$b. Assuming there were no better alternative uses for thespare capacity, it wouldto manufacture theto

Differential analysis compares the costs in the different alternatives. Fixed cost will be incurred…

Answered: uce comparable carrying cases are e -%…

Business

Accounting

uce comparable carrying cases are e -% of direct labor) $28 19 8.36 $55.36 .f. J

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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