Riggs Company purchases sails and produces sailboats. It currently produces 1.210 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $254 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, $87 for direct labor and $90 for overhead. The $90 overhead is based on $78,650 of annual fixed overhead that is allocated using normal capacity The president of Riggs has come to you for advice. "It would cost me $270 to make the sails, she says, "but only $254 to buy them Should I continue buying them, or have I missed something?" (a) Your answer is correct. Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses es. (45)) Net Income Increase (Decrease) Make Sails Buy Sails 93 Direct material 93 87 Direct labor 87 25 Variable overhead 25 254 -254 Purchase price 0 $ -49 $ $ 254 205 Total unit cost Your answer is partially correct If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,500 per year, would your answer to part (a) change? Yes This is because the net income will Increase v bys Assistance Used e Textbook and Media