Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $90 for direct materials, $80 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $260 to make the sails," she says, "but only $250 to buy them. Should I continue buying them, or have I missed something?" Show Transcribed Text Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Sails Buy Sails Net Income Increase (Decrease) Direct material 100 100 Direct labor 80 Variable overhead 90 Purchase price 25 250 Total unit cost 205 250 Should Riggs make or buy the sails? make Riggs should the sails. ☑ 80 250 If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,000 per year, would your answer to part (a) change? 23000 Yes Increase This is because the net income will by $
Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $90 for direct materials, $80 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $260 to make the sails," she says, "but only $250 to buy them. Should I continue buying them, or have I missed something?" Show Transcribed Text Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Sails Buy Sails Net Income Increase (Decrease) Direct material 100 100 Direct labor 80 Variable overhead 90 Purchase price 25 250 Total unit cost 205 250 Should Riggs make or buy the sails? make Riggs should the sails. ☑ 80 250 If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,000 per year, would your answer to part (a) change? 23000 Yes Increase This is because the net income will by $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Don't use ai to answer I will report your answer Solve it Asap with explanation and calculation
Transcribed Image Text:Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at
normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is
considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $90
for direct materials, $80 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual
fixed overhead that is allocated using normal capacity.
The president of Riggs has come to you for advice. "It would cost me $260 to make the sails," she says, "but only
$250 to buy them. Should I continue buying them, or have I missed something?"
Show Transcribed Text
Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign
preceding the number e.g. -45 or parentheses e.g. (45).)
Make Sails
Buy Sails
Net Income
Increase (Decrease)
Direct material
100
100
Direct labor
80
Variable overhead
90
Purchase price
25
250
Total unit cost
205
250
Should Riggs make or buy the sails?
make
Riggs should
the sails.
☑
80
250
Transcribed Image Text:If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,000 per year, would your
answer to part (a) change?
23000
Yes
Increase
This is because the net income will
by $
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