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...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning