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Gibbs Company purchases sails and produces sailboats. It currently produces 1, 265 sailboats per year, operating at normal capacity, which is about 30% of full
Gibbs Company purchases sails and produces sailboats. It currently produces 1, 265 sailboats per year, operating at normal capacity, which is about 30% of full capacity. Gibbs purchases sails at $266.00 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $97.40 for direct materials, 585.00 for direct labor, and $100 for overhead. The $100 overhead includes a component of fixed overhead that is based on $78.020 of annual fixed overhead allocated using normal capacity. The president of Gibbs has come to you for advice. "It would cost me $282.40 to make the sails, " she says, "but only $266.00 to buy them. Should I continue buying them, or have I missed something?" 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).) Should Gibbs make or buy the sails? 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
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