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Problem $13-25($Algo$)$ SourcIng Decislons $[$L$013-3]$

Silven Industries, which manufactures and sells summer lotions and insect repellents, has decided to diversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotions and creams to prevent dry and chapped skin.

After considerable research. Silven developed a new lip balm called Chap$-$Off that is sold to wholesalers in boxes of $24$ tubes for $$13$ per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce Chap$-$Off. However. a $$96,000$ charge for fixed manufacturing overhead will be absorbed by the product under the company's absorption costing system.

Using estimated sales and production of $120\mathrm{.}000$ boxes of Chap$-$Off, the Accounting Department developed the following manufacturing cost per box

$\backslash$table$[[$Direct material,$$5\mathrm{.}40$