Sunland Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating...
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Sunland Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Sunland purchases sails at $260 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $96 for direct materials, $88 for direct labor, and $90 for total manufacturing overhead. The $90 total manufacturing overhead includes $78,690 of annual fixed overhead that is allocated using normal capacity. The president of Sunland has come to you for advice. "It would cost me $274 to make the sails," she says, "but only $260 to buy them. Should I continue buying them, or have I missed something?" (a) 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).) Should Sunland make or buy the sails? Your answer is partially correct. If Sunland 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? . This is because the net income will by $
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Sunland Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Sunland purchases sails at $260 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $96 for direct materials, $88 for direct labor, and $90 for total manufacturing overhead. The $90 total manufacturing overhead includes $78,690 of annual fixed overhead that is allocated using normal capacity. The president of Sunland has come to you for advice. "It would cost me $274 to make the sails," she says, "but only $260 to buy them. Should I continue buying them, or have I missed something?" (a) 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).) Should Sunland make or buy the sails? Your answer is partially correct. If Sunland 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? . This is because the net income will by $ 