Exercise 20-7 Riggs Company purchases sails and produces sailboats. It currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $256 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $90.54 for direct materials, $89.54 for direct labor, and $90 for overhead. The $90 overhead includes $78,500 of annual fixed overhead that is allocated using normal capacity The president of Riggs has come to you for advice. "It would cost me $270.08 to make the sails," she says, "but only $256 to buy them Should I continue buying them, or have I missed something?" Your answer is partially correct. Try again Prepare a per unit analysis of the differential costs. (Round answers to 2 decimal places, e.g. 15.75. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Sails Buy Sails Increase (Decrease) Direct material 90.54 90.54 Direct labor 89.54 89.54 Variable overhead 89.92 Purchase price 256 -256 Total unit cost 256 Your answer is incorrect. Try again If Riggs 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? Tas because the -he. this question: gpengerms Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT VIDEO: SIMILAR EXERCISE VIDEO: APPLIED SKILLS