{"id":23699,"date":"2022-01-09T06:53:52","date_gmt":"2022-01-09T06:53:52","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/e7-7-riggs-company-purchases-sails-and-produces-sailboats-it\/"},"modified":"2022-01-09T06:53:52","modified_gmt":"2022-01-09T06:53:52","slug":"e7-7-riggs-company-purchases-sails-and-produces-sailboats-it","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/e7-7-riggs-company-purchases-sails-and-produces-sailboats-it\/","title":{"rendered":"E7-7 riggs company purchases sails and produces sailboats. it"},"content":{"rendered":"<div>\n<p><span><span>E7-7 <\/span><span>Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats<\/span><span> 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.<\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<p><span><span>The president of Gibbs has come to you for advice. \u201cIt would cost me $270 to make the sails,\u201d she says, \u201cbut only $250 to buy them. Should I continue buying them, or have I missed something?\u201d<\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<p><em><span><br \/><span> Instructions <br \/><\/span><\/span><\/em><span><span>(a) Prepare a per unit analysis of the differential costs. Briefly explain whether Riggs should make or buy the sails.<\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<p><span><span>(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.<\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<p><span><span>(c) Identify three qualitative factors that should be considered by Riggs in this make-or-buy decision.<span>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><span>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/span><span>\u00a0\u00a0 <\/span>(CGA adapted)<\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>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 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-23699","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23699","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=23699"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23699\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=23699"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=23699"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=23699"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}