Ol Salt Enterprises produces 1,000 sailboats per year. Although the company currently buys sails for the sailboats
Question:
a. Prepare a differential analysis to show whether Ol’ Salt Enterprises should make or buy the sails. What should you recommend to management? Explain why the $200,000 fixed costs allocated to sail making is or is not relevant to the decision.
b. If Ol’ Salt buys the sails, then it would have unused factory space. Suppose Ol’ Salt received an opportunity to rent out this unused factory space for $80,000 per year.
Would that affect your recommendation in part a.?
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Related Book For
Managerial Accounting An Introduction to Concepts Methods and Uses
ISBN: 978-0324639766
10th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil
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