Riggs Compary purctases sails and produces sailboats it currently produces $1,200$ sailbats per year, aperating at normal capacity. which is about $80\%$ of full capacity. Riggs purchases sails at $$250$ each, but the company is considering using the excss capacity to manufacture the sails instead. The manufacturing cost per sail would be $$100$ for direct materials, $$90$ for direct labor, and $$90$ for total manufacturing overhead. The $$90$ total manufacturing overhead includes $$78,000$ of annual fwed overhead that is allocatod using nomnal capscity.

The presidenk of Riges has come to you for advice. $"$It would cost me $$270$ to make the sails," she says, "but only $$250$ to buy them. Shauld I continue buying them, or have I missed something?

$($a$)$

Your answer is correct. of purutheses es: $(45).$

$($b$)$

If Rizss suddenly finds an opporeunity ta rent out the unused capacity of its factory for $$77,000$ per year, wauld your answer to part $($a$)$ change?

This is bectuse the net incame will brs