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Sandhill Company purchases sails and produces sailboats. It currently produces 1,280 sailboats per year, operating...

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Accounting

Sandhill Company purchases sails and produces sailboats. It currently produces 1,280 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Sandhill purchases sails at $258 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, $87 for direct labor, and 590 for total manufacturing overhead. The $90 total manufacturing overhead includes $78,080 of annual fixed overhead that is allocated using normal capacity.

The president of Sandhill has come to you for advice. "It would cost me $268 to make the sails," she says, "but only $258 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 eg. -45 or parentheses eg: (45).)

Net Income Increase (Decrease) Make Sails Buy Sails Direct material $ $ $ Direct labor Variable overhead Purchase price Total unit cost $ $ $ Should Sandhill make or buy the sails? Sandhill should the sails.

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