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 includes $ 78,000 of annual fixed overhead that is allocated using normal capacity.

the president of riggs 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? "

It is more convenient to produce the sails in house.

Explanation:

Giving the following information:

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 includes $ 78,000 of annual fixed overhead that is allocated using normal capacity.

Because there will not be an increase in fixed costs, we will not have them into account.

Variable overhead= 90 - (78,000/1,200)= 25

Unitary variable cost= 100 + 80 + 25= 205

It is more convenient to produce the sails in house.

answer; i believe the answer is 40,600,000;

the clients (funders) and customers (individual nonprofit staff) are great to work with. that i can be open about being a person of faith when appropriate. the variety of my tasks each day.