Carla Vista Company purchases sails and produces sailboats. It currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Carla Vista purchases sails at $262 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $94 for direct materials, $84 for direct labor, and $90 for overhead. The $90 overhead is based on $77,500 of annual fixed overhead that is allocated using normal capacity. The president of Carla Vista has come to you for advice. "It would cost me $268 to make the sails," she says, "but only $262 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).) Direct material Direct labor Variable overhead Purchase price Total unit cost Make Sails Carla Vista should $ $ Should Carla Vista make or buy the sails? the sails. $ LA $ LA Buy Sails $ $ Net Income Increase (Decrease)

Carla Vista Company purchases sails and produces sailboats. It currently produces 1,250 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Carla Vista purchases sails at $262 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $94 for direct materials, $84 for direct labor, and $90 for overhead. The $90 overhead is based on $77,500 of annual fixed overhead that is allocated using normal capacity. The president of Carla Vista has come to you for advice. "It would cost me $268 to make the sails," she says, "but only $262 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).) Direct material Direct labor Variable overhead Purchase price Total unit cost Make Sails Carla Vista should $ $ Should Carla Vista make or buy the sails? the sails. $ LA $ LA Buy Sails $ $ Net Income Increase (Decrease)

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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