Gibbs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal
Question:
The president of Gibbs has come to you for advice. “It would cost me $280 to make the sails,” she says, “but only $250 to buy them. Should I continue buying them, or have I missed something?”
Instructions
(a) Prepare a per unit analysis of the differential costs. Briefly explain whether Gibbs should make or buy the sails.
(b) If Gibbs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,000 per year, would your answer to part (a) change? Briefly explain.
(c) Identify three qualitative factors that should be considered by Gibbs in this make-or-buy decision.
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Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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