Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $40 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 25% 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.
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 an amount is zero, enter "0". If required, round your answers to two decimal places. 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 $ $ $
Unit costs:
Purchase price
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
Income (loss) $ $ $
b. Assuming there were no better alternative uses for the spare capacity, it would (Be advisable, Not be advisable) to manufacture the carrying cases. Fixed factory overhead is(Relevant, Irrelevant) to this decision.

A. Make carrying case(Alternative 1) $41.00

Buy carrying case (Alternative 2)$44.00

Differential effect on net income (Alternative 2)($3.00)

B. Assuming there were no better alternative uses for the spare capacity, it would BE ADVISABLE to manufacture the CARRYING CASES. Fixed overhead is IRRELEVANT to this decision.

Explanation:

A. Preparation of a Differential Analysis

DIFFERENTIAL ANALYSIS

Make carrying case Buy carrying case

(Alternative 1) (Alternative 2)

Alternative 1Alternative 2Differential effect on net income (Alternative 2)

Sales price

$0.00 $0.00 $0.00

Purchase Price

$0.00 $40.00 ($40.00)

Direct materials

$16.00$0.00 $16.00

Direct labor

$20.00 $0.00 $20.00

Variable manufacture overhead (20*5%=$1.00)

$1.00 $0.00 $1.00

Fixed manufacture overhead($5.00-$1.00) $4.00 $4.00 $0.00

Income(Loss)

$41.00 $44.00 ($3.00)

Based on the above calculation Alternative 1 which is carrying case should be Choose by the Company .

B. Therefore Assuming there were no better alternative uses for the spare capacity, it would BE ADVISABLE to manufacture the CARRYING CASES. Fixed overhead is IRRELEVANT to this decision.

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explanation:

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answer: b. false

the staff is a set of five horizontal lines and four spaces which represent a different musical pitch. the lines and the spaces are numbered from bottom to top, the bottom line is the first line and the fifth line is the line on the top. the notes on the top of the staff (fifth line) have a higher pitch than a note at the bottom of the staff.