Balboa Technologies Company has been purchasing carrying cases for its portable computers at a delivered cost of $20 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 fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:
If Balboa Technologies 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 20% of the direct labor costs.
Direct Materials- $9.00 Direct Labor- $7.50 Factory overhead (60% of labor cost) $4.50 total cost per unit $21.00
a. Prepare a differential analysis report, dated June 19, 2012, for the make-or-buy decision. Enter amounts to the nearest cent.