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d Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $26 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $48.08 If Somerset 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 13% of the direct labor costs a. Prepare a differential analysis dated April 30 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. It an amount is zero, enter "0" Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Buy Make Carrying Carrying Case Case (Alternative 1) (Alternative 2) 36 Unit costs: Purchase price Differential Effects (Alternative 2) 56

d Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $26 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $48.08 If Somerset 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 13% of the direct labor costs a. Prepare a differential analysis dated April 30 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. It an amount is zero, enter "0" Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Buy Make Carrying Carrying Case Case (Alternative 1) (Alternative 2) 36 Unit costs: Purchase price Differential Effects (Alternative 2) 56

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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<d AD HOW Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unt. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $26 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $48.08 If Somerset 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 13% of the direct labor costs a. Prepare a differential analysis dated April 30 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. It an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Buy Make Carrying Carrying Case Case (Alternative 1) (Alternative 2) 56 Unit costs: Purchase price Differential Effects (Alternative 2) 56
Transcribed Image Text:<d AD HOW Make-or-Buy Decision Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $56 per unt. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $26 Direct labor 16 Factory overhead (38% of direct labor) 6.08 Total cost per unit $48.08 If Somerset 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 13% of the direct labor costs a. Prepare a differential analysis dated April 30 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. It an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Buy Make Carrying Carrying Case Case (Alternative 1) (Alternative 2) 56 Unit costs: Purchase price Differential Effects (Alternative 2) 56
alysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. In required, round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Buy Carrying Carrying Case Case Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Purchase price 56 56 Direct materials 26 26 Direct labor 16 16 6.08 Variable factory overhead 6.08 Fixed factory overhead Total unit costs to manufacture the carrying cases Factory b. Assuming there were no better alternative uses for the spare capacity, it would be advisable overhead is to this decision. Previous Next > Check My Work Unit costs:
Transcribed Image Text:alysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. In required, round your answers to two decimal places. If an amount is zero, enter "0". Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) April 30 Make Buy Carrying Carrying Case Case Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Purchase price 56 56 Direct materials 26 26 Direct labor 16 16 6.08 Variable factory overhead 6.08 Fixed factory overhead Total unit costs to manufacture the carrying cases Factory b. Assuming there were no better alternative uses for the spare capacity, it would be advisable overhead is to this decision. Previous Next > Check My Work Unit costs:
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