Alternate Problem Alternate problem : Sailboard Enterprises, a wind sailing Board manuincturer, is currently operating at 70% capacity and producing about 20,000 union year. To use more capacity, the manager has been considering the research and development department's suggestion that Sailboard manufacture its own sails. Currently Sailboard purchases sails from a supplier at a cost of $100 per unit. Estimates show that Sailboard can manufacture its own sails for a $40 direct materials cost and a $32 direct labor cost per unit. The variable factory overhead is $8 per sail. The company's accountants would allocate fixed manufacturing overhead of $30 per sail to the sail production Requirements: a. Should Sailboard Enterprises make or buy the sails? b. Suppose that Sailboard Enterprises could rent out the part of the factory that would otherwise be used for sail manufacturing for $8,000 a month. How would this affect the decision in (a)? 26 points Alt Prob D a. Make or Buy 20,000 units Direct Material Direct Labor Variable Overhead Fixed Allocated Overhead Total relevant cost to make Total Costs per Sail to Make 40 $ 32 $ BIS 303 $ Relevant Costs 405 325 815 5 803 Relevants Costs for 20,000 units 300,000 540.000 160.000 do not include since it is an allocation anly-this cost is irrelavant 1,600,000 Current supplier price to purchase 1005 2.000.000 Differential cost (400.000 The company should make the souls Conclusion: b. Space could be rented for 8,000 per month To Make To Buy Relevant Costs Opportunity Cost to rent factory Total Costs Cost Differential