Riggs Company purchases sails and produces sailboats. It currently produces $1,280$ sailboats per year, operating at normal capacity, which is about $80\%$ of full capacity. Riggs purchases sails at $$255$ each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $$97$ for direct materials, $$87$ for direct labor, and $$90$ for overhead. The $$90$ overhead is based on $$78,080$ of annual fixed overhead that is allocated using normal capacity.

The president of Riggs has come to you for advice. $"$It would cost me $$274$ to make the sails, she says, "but only $$255$ to buy them. Should I continue buying them, or have I missed something?"

Your answer is correct.

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$.(45).)$

Should Riggs make or buy the sails?

Riggs should the sails.

$($b$)$

Your answer is partially correct.

If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $$77,900$ per year, would your answer to part $($a$)$ change?

This is because the net income will by $

eTextbook and Media

Attempts: $2$ of $3$ used