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25-6 HART COMPUTER COMPANY HAS BEEN PURCHASING CARRYING CASES FOR ITS PORTABLE COMPUTERS AT A DELIVERED COST OF $68 PER UNIT.
1. 25-6 HART COMPUTER COMPANY HAS BEEN PURCHASING CARRYING CASES FOR ITS PORTABLE COMPUTERS AT A DELIVERED COST OF $68 PER UNIT. THE COMPANY, WHICH IS CURRENTLY OPERATING BELOW FULL CAPACITY, CHARGES FACTORY OVERHEAD TO PRODUCTION AT THE RATE OF 35% OF DIRECT LABOR COST. THE FULLY ABSORBED UNIT COSTS TO PRODUCE COMPARABLE CARRYING CASES ARE EXPECTED TO BE:Direct Materials $25.00Direct Labor 32.00Factory Overhead (35% of direct labor) 11.20Total Cost per unit $68.20If Hart 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 25% of the direct labor costs.a. Prepare a differential analysis report dated June 5, 2008, for the make-or-buy decision.b. On the bases of the data presented, would it be advisable to make the carrying cases or to continue buying them. Explain?
Unit cost for mfg the carrying caseDirect MaterialDirect LabourVariable factory overhead( 25 % of DL )Total unit cost 25328 Unit cost of BuyingLess : Unit cost of MfgSaving 68653 65 If...