Chapter 20 Homework Question 5 of 6 < > Show Attempt History Current Attempt in Progress 11.67/20 Riggs Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $260 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, $88 for direct labor, and $90 for overhead. The $90 overhead is based on $78,690 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $274 to make the sails," she says, "but only $260 to buy them. Should I continue buying them, or have I missed something?" Your answer is partially correct. 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).) Direct material Direct Make Sails Buy Sails labor Variable overhead Purchase 260.00 price Total unit $ 260.00 $ cost Net Income Increase (Decrease) -260.00 estion 5 of 6 < > overhead Purchase price Total unit $ cost Should Riggs make or buy the sails? Riggs should make the sails. eTextbook and Media 260.00 260.00 i 11.67/20 A E -260.00 Your answer is partially correct. If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,600 per year, would your answer to part (a) change? Yes This is because the net income will Increase by $ 18060 eTextbook and Media