Matchless Computer Company has been purchasing carrying cases for its portable c
ID: 2488907 • Letter: M
Question
Matchless Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $55 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 45% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: If Matchless 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 13% of the direct labor costs.Explanation / Answer
Particulars
Make
Buy
Differntial impact on income
Purchase cost
-50.47
-55
4.53
Direct matrial cost per unit
-29
Direct labour cost per unit
-19
variable factory overhead per unit (13%)
-2.47
Fixed factory overhead cost per unit
0
Income (loss)
Its better to make rather than buy.
Particulars
Make
Buy
Differntial impact on income
Purchase cost
-50.47
-55
4.53
Direct matrial cost per unit
-29
Direct labour cost per unit
-19
variable factory overhead per unit (13%)
-2.47
Fixed factory overhead cost per unit
0
Income (loss)