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Exercise 20-07 a-b (Video) Sandhill Company purchases sails and produces sailboats. It currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Sandhill purchases sails at $256 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, $90 for direct labor, and $90 for overhead. The $90 overhead is based on $78,750 of annual fixed overhead that is allocated using normal capacity. The president of Sandhill has come to you for advice. "It would cost me $271 to make the sails," she says, "but only $256 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).) Make Sails Buy Sails Net Income Increase (Decrease) Direct material Direct labor Variable overhead Purchase price Total unit cost Should Sandhill make or buy the sails? Sandhill should the sails. If Sandhill suddenly finds an opportunity to rent out the unused capacity of its factory for $78,000 per year, would your answer to part (a) change? . This is because the net income wil Increase Decrease Click if you would like to Show Work fo : Open Show Work