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? No 41. This is because the net income will decrease 4 by $ Riggs Company purchases sails and produces sailboats. It currently produces 1,300 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $269 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $93.35 for direct materials, $85.13 for direct labor, and $90 for overhead. The $90 overhead includes $78,300 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $268.48 to make the sails," she says, but only $269 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. 15.75. Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Make Sails Net Income Increase (Decrease) Buy Sails Direct material $ 93.35 93.35 Direct labor 85.13 85.13 Variable overhead 29.77 29.77 Purchase price 269 269 Total unit cost $ 208.25 i 269 6 -60.75 i Should Riggs make or buy the sails? Riggs should make the sails. e Textbook and Media Attempts: 2 of 7 used