Make-or-Buy Decision

Post Technologies Company has been purchasing carrying cases for its portable tablets at a delivered cost of $13.00 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 total unit costs to produce comparable carrying cases are expected to be as follows:

Direct materials	$4.00
Direct labor	6.50
Factory overhead (60% of direct labor)	3.90
Total cost per unit	$14.40

If Post 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.

a. Prepare a differential analysis report for the make-or-buy decision. Enter your final answer as a positive amount if it represents a net cost savings; enter a negative amount if it represents an increase in cost.

POST TECHNOLOGIES COMPANY Make or Buy Carrying Case Differential Analysis Report

Purchase price of carrying case Differential cost to manufacture carrying case: Direct materials Direct labor Variable factory overhead Cost savings from manufacturing carrying cases -