Riggs Company purchases sails and produces sailboats. It currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80 % of full capacity. Riggs purchases sails at $ 262 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $ 94.17 for direct materials, $ 84.43 for direct labor, and $ 90 for overhead. The $ 90 overhead includes $ 78,100 of annual fixed overhead that is allocated using normal capacity.

The president of Riggs has come to you for advice. Ac€A?It would cost me $ 268.60 to make the sails,Ac€?? she says, Ac€A?but only $ 262 to buy them. Should I continue buying them, or have I missed something?Ac€??

Prepare a per unit analysis of the differential costs

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Status NEW Posted 04 Aug 2017 02:08 PM My Price 7.00

 S-----------inc-----------e d-----------eci-----------sio-----------n t-----------o m-----------anu-----------fac-----------tur-----------e s-----------ail-----------s i-----------s b-----------y u-----------sin-----------g e-----------xce-----------ss -----------cap-----------aci-----------ty -----------(as----------- th-----------e p-----------lan-----------t i-----------s a-----------lre-----------ady----------- op-----------era-----------tin-----------g a-----------t n-----------orm-----------al -----------cap-----------aci-----------ty -----------of -----------80%-----------), -----------the----------- 'm-----------anu-----------fac-----------tur-----------e' -----------or -----------'bu-----------y'

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