Help I System Announcements .( Unread) URCES Exercise 21-7 (Part Level Submissio
ID: 2577385 • Letter: H
Question
Help I System Announcements .( Unread) URCES Exercise 21-7 (Part Level Submission) Riggs Compamy purchases sals and produces salbeats. It ourently produces 1,270 salboats a0 % of fuli capacity, Riggs pureases sals at S 268 each, me conmyis endeng anse aastaaeveNoer nstead. The manufacturing cost per sall would be $9819 for direct mateils 86.07 for direct laber, and $ o for overtend The $90 vread includes $ 78,300 of annual fixed overhead that is allocated using normal capecity per year, operating a·omer-oty, wnich is about The president of Riggs has come to you for advice. "1lt wouid cost me $ 274.26 to make the sats she says, "but only 5268 no bay them. Shous t continue buying them, or have I missed something? (a) Study Your answer is partialy correct. Try again. Prepare a per unit analysis of the diferential costs (Round answers to 2 a negative sign preceding the mumber e-g. -45 or parentheses e .(4sp) decimal places eg. 38,2s Make Sails Buy Sails Direct matenal Direct labor Variable overhead Purchase price Total unit cost 86.07 Should Riggs make or buy the sails? 44 18Explanation / Answer
Note 1 : The Fixed overhead has to be excluded as this will be incurred irrespective of the choice (make/buy) made.
Answer: The company should make the product as the cost of produing the product is much lesser than the cost of buying it.
Cost when the product is made $184.26
Cost when the product is bought $258
Make Sails Buy Sails Comments Direct Material 98.19 Direct labour 86.07 Variable Overhead Ref Note 1 Purchase Price 258 Total Unit Price 184.26 258Related Questions
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