Variable factory overhead cost associated with cases

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Reference no: EM13825229

Eclipse Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $65 per unit. the company which is currently operating below full capacity charges factory overhead to production at the rate of 40% of direct labor cost. the fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:

direct materials 30

direct labor 25

factory overhead 40% of direct labor 10

total cost per unit $65

if eclipse computer company manufacturers the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.

a. prepare a differential analysis dated july 19, 2014 to determine whether the company should make or buy the carrying case

b. on the basis of the data presented would it be advisable to make the carrying cases or to continue buying them? Explain.

Reference no: EM13825229

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