4.1775 Pharoah Company purchases sails and produces sailboats. It currently produces 1,220 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Pharoah purchases sails at $261 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $96 for direct materials, $80 for direct labor, and $90 for overhead. The $90 overhead is based on $78,080 of annual fixed overhead that is allocated using normal capacity. The president of Pharoah has come to you for advice. "It would cost me $266 to make the sails," she says, "but only $261 to buy them. Should I continue buying them, or have I missed something?" (a) Your answer is correct. ILL 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 eg. (45).) Make Sails Buy Sails Net Income Increase (Decrease) Direct material $ 96 $ $ 96 Direct labor 80 80 Make Sails Buy Sails Net Income Increase (Decrease) Direct material $ 96 $ $ 96 Direct labor 80 80 Variable overhead 26. 26 Purchase price 261 -261 Total unit cost $ 202 $ 261 $ -59 Should Pharoah make or buy the sails? Pharoah should make the sails. If Pharoah suddenly finds an opportunity to rent out the unused capacity of its factory for $78,000 per year, would your answer to part (a) change? Yes v This is because the net income will Increase v by$