Gibbs Company purchases sails and produces sailboats. It currently produces 1,297 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Gibbs purchases sails at $263.00 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $93.70 for direct materials, $80.00 for direct labor, and $100 for overhead. The $100 overhead includes a component of fixed overhead that is based on $78,160 of annual fixed overhead allocated using normal capacity. The president of Gibbs has come to you for advice. It would cost me $273.70 to make the sails, she says, but only $263.00 to buy them. Should I continue buying them, or have I missed something?

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Prepare a per unit analysis of the differential costs.(Round answers to 2 decimal places, e.g. 15.25.Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net Income Increase (Decrease) (Last column next to Buy Sails)	Make Sails	Buy Sails
Direct material	$	$	$
Direct labor
Variable overhead
Purchase price
Total unit cost	$	$	$

Should Gibbs make or buy the sails? MakeBuy

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If Gibbs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,290 per year, would your answer to part (a) change? NoYes