Riggs Company purchases sals and produces sailboats t currently produces 1,250 s

Question

Riggs Company purchases sals and produces sailboats t currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80% of full capacity Riggs purchases sails at $262 each but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $94.17 or direct materials $84.43 or direct labor, and 90 for overhead. The $90 o erhead includes s78, 100 of annual xed overhead that is alocated using normal capacity. The president of Riggs has come to you for advice. "It would cost me $268.60 to make the sails," she says, "but only $262 to buy them. Should I continue buying them, or have I missed something? Your answer is correct. Prepare a per unit analysis of the differential costs. (Round answers to 2 decimal places, e.g. 15.75. 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 94.1 84.4 27.52 Direct material 94.1 Direct labor 84.43 Variable overhead 27 Purchase price (262) Total unit cost 206.1 (55.88 Should Riggs make or buy the sails make the sails. Riggs should Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 2 of 5 used lYour answer is partially correct. Try again. If Riggs suddenly finds an opportunity to rent out the unused capacity of its factory for $77,600 per year, would your answer to part (a) change? increase by (55.88) This is because the net income will Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

b) Make cost = (1250*206.12+77600) = 335250

Buy Cost = 1250*262 = 327500

Difference = 335250-327500 = 7750

Yes, This is because the net income will increase by 7750

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.