Companion 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 belowfull capacity, charges factory overhead to production at the rate of 46% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to beas follows:Direct materials$28Direct labor16Factory overhead (46% of direct labor)7.36Total cost per unit$51.36If Companion Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases areexpected to be 14% of the direct labor costs. Differential AnalysisMake Carrying Case (Alt. 1) or Buy Carrying Case (Alt. 2)February 24Make CarryingBuy CarryingCase (Alternative 1) Case (Alternative 2) on Income (Alternative 2)Differential EffectSales PriceCosts:Purchase priceDirect materials per unitDirect labor per unitVariable factory overhead per unitFixed factory overhead per unitIncome (Loss)

Fixed factory overhead per unit = Direct Labor per unit x (46%-14%) = $16*(46%-14%) = $5.12

Answered: Companion Computer Company has been…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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