Question

# Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price...

Matchless 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 42% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:

 Direct materials \$24 Direct labor 19 Factory overhead (42% of direct labor) 7.98 Total cost per unit \$50.98

If Matchless 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 February 24 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". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

 Differential Analysis Make Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2) February 24 Make Carrying Case (Alternative 1) Buy Carrying Case (Alternative 2) Differential Effect on Income (Alternative 2) Sales Price \$ \$ \$ Costs: Purchase price \$ \$ \$ Direct materials per unit Direct labor per unit Variable factory overhead per unit Fixed factory overhead per unit Income (Loss) \$ \$ \$

b. Assuming there were no better alternative uses for the spare capacity, it would be advisable or not advisable to manufacture the carrying cases. Fixed factory overhead is relevant or irrelevant to this decision.

Solution a:

 Differential Analysis - Making Carrying Case (alt 1) or Buying Carrying Case (Alt2) Particulars Making Carrying Case (Alt 1) Buying Carrying Case (Alt 2) Financial advantage (Disadvantage) of buying (Alternative 2) Sales price \$0.00 \$0.00 \$0.00 Costs: Purchase Price \$0.00 -\$57.00 -\$57.00 Direct material per unit -\$24.00 \$0.00 \$24.00 Direct Labor per unit -\$19.00 \$0.00 \$19.00 Variable overhead per unit -\$2.47 \$0.00 \$2.47 Fixed factory overhead per unit -\$5.51 -\$5.51 \$0.00 Income (Loss) -\$50.98 -\$62.51 -\$11.53

Solution b:

Assuming there were no better alternative uses for the spare capacity, it would be advisable to manufacture the carrying cases. Fixed factory overhead is irrelevant to this decision.

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Need Online Homework Help?

Most questions answered within 1 hours.

##### Active Questions
• Complete drug card- Generic /brand name Category class expected Pharmacological Action Complications Contraindications/Precautions Interactions Medication Administration...
• Discuss the similarities and differences between the discounted dividend and corporate valuation models.
• Consider an investment that pays \$18.8 in year 1, and then stabilizes and pays \$6.18 every...
• The toasters produced by a company have a normally distributed life span with a mean of...
• Rome Petshop uses 3 different ingredients to manufacture 4 types of dog food. These 3 ingredients...
• Once a SARS-CoV 2 virion has successfully bound to ACE2 (most commonly expressed by cells in...