Question 2 Ivanhoe 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. Ivanhoe purchases sails at $258 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $93 for direct materials, $83 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual fixed overhead that is allocated using normal capacity. The president of Ivanhoe has come to you for advice. "It would cost me $266 to make the sails," she says, "but only $258 to buy them. Should I continue buying them, or have I missed something?" (a) Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Sails Buy Sails Direct material ta $ Direct labor Variable overhead Purchase price Total unit cost Should Ivanhoe make or buy the sails? Ivanhoe should the sails