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Matchless Computer Company has been purchasing carrying cases for its portable computers
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Matchless Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $60 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials$28.00

Direct labor19.00

Factory overhead (38% of direct labor)7.22

Total cost per unit$54.22

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 12% of the direct labor costs.

 Differential analysis, dated October 11, 2014, to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case.

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