Business, 10.06.2020 03:57 naimareiad

Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $89 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 60% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $16
Direct labor 20
Factory overhead (25% of direct labor) 5
Total cost per unit $41

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 5% of the direct labor costs.

Required:
a. Prepare a differential analysis dated September 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case.
b. Assuming there were no better alternative uses for the spare capacity, it would to manufacture the carrying cases. Fixed factory overhead isto this decision.

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