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University Of Southern Californi Operations And Supply Chain Management Assignment Help - Harmon Company

Question - Harmon 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.
Harmon purchases sails at $260 each, but the company is considering using the excess capacity to
manufacture the sails instead. The manufacturing cost per sail would be $100 for materials, $80 for
direct labor, and $100 for overhead. The $100 overhead is based on $72,000 of annual fixed
overhead that is allocated using normal capacity.
The president of Harmon has come to you for advice. "It would cost me $280 to make the sails," she
says, "but only $260 to buy them. Should I continue buying them, or have I missed something?"

(a) Prepare a per unit an ...Read More

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