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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 80% of full capacity.
Gibbs Company purchases sails and produces sailboats. It currently produces 1.265 sailboats per year, operating at normal capacity, which is about 80% 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, $85.00 for direct labor, and $100 for overhead. The $100 overhead includes a component of fixed overhead that is based on 578, 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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