ek 11 Chapter 25 Assignment Show e How Calculator Make-or-Buy Decsion aret y age
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ek 11 Chapter 25 Assignment Show e How Calculator Make-or-Buy Decsion aret y agentne bel-taai nry charge htry oveh nd to pro trhe compar n Computer Company has been purchaseq carryng eases for its potable omputm???·prchase price of ,55 pe unt. The tr?amy, wheh at the rate of 40% ol direct labor cost. The fuly absorbed unt costs to produce comparable arrying oves are "pected to be as folows: Direct materials Direct labor Factory overhead (40% of direct labor) 7.6 Total cost per unn $28 554.6 the carrying cases, fixed doctory overhead costs w rot increase and variable tactory overhead costs mooted with the cases are expected to be 20% of tho direct Prepare a offerental reqared, ound your etd analyus dated February 24 to determine whether the company shouald make (Aternative 3) or buy (Abermative2) the carryng case enter zero "o" For those boxes in which you must enter subtracted or negstive numbers use a minus sign Diflerential Analysis Make Carrying Case (At. 1) or Baay Carrying Case (A. 2) uy Carrying Case (Ahmative 1) Case (Alternati e 2) on ?ncemeAhentive ') Sales Price Purchanse price Deect matenials per unit Direct labor per unt anable factory ovehead per unit Previous here toExplanation / Answer
Requirement a Differential analysis Make Carrying case(Alt-1) or Buy Carrying case(Alt-2) Make Carrying case(Alt-1) Buy Carrying Case(Alt-2) Differential effect on Income(Alt-2) Sales Price 0 0 0 Costs Purchase price 0 55 55 Direct Materials per unit 28 0 -28 Direct labor per unit 19 0 -19 Variable Manufacturing overhead per unit 3.04 0 -3.04 Fixed factory overhead per unit 0 0 0 Income/(Losses) -50.04 -55 4.96 Since, there is lesser cost of making the carrying cases, the company should make the carrying cases. Requirement 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 decision.
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