The writer is very fast, professional and responded to the review request fast also. Thank you.
E7-7 Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $100 for direct materials, $80 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual fixed overhead that is allocated using normal capacity.
The president of Gibbs has come to you for advice. “It would cost me $270 to make the sails,” she says, “but only $250 to buy them. Should I continue buying them, or have I missed something?”
(a) Prepare a per unit analysis of the differential costs. Briefly explain whether Riggs should make or buy the sails.
(b) If Riggs 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 Riggs in this make-or-buy decision. (CGA adapted)
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more