Current Attempt in Progress

Sunland Company purchases sails and produces sailboats. It currently produces $1,280$ sailboats per year, operating at normal capacity, which is about $80\%$ of full capacity. Sunland purchases sails at $$255$ each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $$97$ for direct materials, $$87$ for direct labor, and $$90$ for overhead. The $$90$ overhead is based on $$78,080$ of annual fixed overhead that is allocated using normal capacity.

The president of Sunland has come to you for advice. $"$It would cost me $$274$ to make the sails," she says, "but only $$255$ to buy them. Should I continue buying them, or have I missed something?"

$($a$)$

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$.(45).)$

Net Income

Buy Sails

Increase $($Decrease$)$

If Sunland suddenly finds an opportunity to rent out the unused capacity of its factory for $$77,900$ per year, would your answer to part $($a$)$ change?

This is because the net income will by $

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