Riggs Company purchases sails and produces sailboats. It currently produces 1,240 sailboats per year, operating at...
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Riggs Company purchases sails and produces sailboats. It currently produces 1,240 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 $91 for direct materials, $85 for direct labor, and $90 for overhead. The $90 overhead is based on $78,120 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $266 to make the sails," she says, "but only $255 to buy them. Should I continue buying them, or have I missed something?" 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 $ Direct labor Variable overhead Purchase price Total unit cost $ $ Riggs Company purchases sails and produces sailboats. It currently produces 1,240 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 $91 for direct materials, $85 for direct labor, and $90 for overhead. The $90 overhead is based on $78,120 of annual fixed overhead that is allocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $266 to make the sails," she says, "but only $255 to buy them. Should I continue buying them, or have I missed something?" 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 $ Direct labor Variable overhead Purchase price Total unit cost $ $
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Answer i In the given case while analysing whether to make or buy the decision ... View the full answer
Related Book For
Managerial Accounting Tools For Business Decision Making
ISBN: 9781119754053
9th Edition
Authors: Jerry J Weygandt, Paul D Kimmel, Jill E Mitchell
Posted Date:
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