Make-or-Buy Decision Fremont 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 42% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $29 Direct labor 17 Factory overhead (42% of direct labor) 7.14 Total cost per unit $53.14 If Fremont 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 September 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. If an amount is zero, enter “0”. Use a minus sign to indicate a loss. Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) September 30 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $fill in the blank 9ef411f9f060f89_1 $fill in the blank 9ef411f9f060f89_2 $fill in the blank 9ef411f9f060f89_3 Unit costs: Purchase price fill in the blank 9ef411f9f060f89_4 fill in the blank 9ef411f9f060f89_5 fill in the blank 9ef411f9f060f89_6 Direct materials fill in the blank 9ef411f9f060f89_7 fill in the blank 9ef411f9f060f89_8 fill in the blank 9ef411f9f060f89_9 Direct labor fill in the blank 9ef411f9f060f89_10 fill in the blank 9ef411f9f060f89_11 fill in the blank 9ef411f9f060f89_12 Variable factory overhead fill in the blank 9ef411f9f060f89_13 fill in the blank 9ef411f9f060f89_14 fill in the blank 9ef411f9f060f89_15 Fixed factory overhead fill in the blank 9ef411f9f060f89_16 fill in the blank 9ef411f9f060f89_17 fill in the blank 9ef411f9f060f89_18 Income (Loss) $fill in the blank 9ef411f9f060f89_19 $fill in the blank 9ef411f9f060f89_20 $fill in the blank 9ef411f9f060f89_21 b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead is to this decision.
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