ompanion Computer Company has been purchasing carrying cases for its

ompanion Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 36% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: 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 15% of the direct labor costs. a. Prepare a differential analysis, dated October 11, 2014, 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 zero 0. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) October 11, 2014 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Costs: Purchase price Correct 9 of Item 1 Correct 10 of Item 1 Correct 11 of Item 1 Direct materials per unit Correct 13 of Item 1 Correct 14 of Item 1 Correct 15 of Item 1 Direct labor per unit Correct 17 of Item 1 Correct 18 of Item 1 Correct 19 of Item 1 Variable factory overhead per unit Correct 21 of Item 1 Correct 22 of Item 1 Correct 23 of Item 1 Fixed factory overhead per unit Correct 25 of Item 1 Correct 26 of Item 1 Correct 27 of Item 1 Income (Loss) Correct 29 of Item 1 Correct 30 of Item 1 Correct 31 of Item 1 b. Assuming there were no better alternative uses for the spare capacity, it would Selectbe advisablenot be advisableCorrect 1 of Item 2 to manufacture the carrying cases. Fixed factory overhead is SelectrelevantirrelevantCorrect 2 of Item 2 to this decision.

Direct materials

.00

Direct labor

16.00

Factory overhead (36% of direct labor)

5.76

Total cost per unit

.76