All Sports Company's production manager, Chris Adler, had requested to have lunch with the company president. Adler wanted to put forward his suggestion to add a new product line. As they finished lunch, Meg Thomas, the company president, said, "T'II give your proposal some serious thought, Chris. I think you're right about the increasing demand for skateboards. What l'm not sure about is whether the skateboard line will be better for us than our tackle boxes. Those have been our bread and butter the past few years." Adler responded with, "Let me get together with one of the controller's people. We'll run a few numbers on this skateboard idea that I think will demonstrate the line's potential." All Sports is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores. About 60 percent of All Sports' products are purchased from other companies while the remainder of the products are manufactured by All Sports. The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes. All Sports is able to manufacture and sell 15,000 tackle boxes annually, making full use of its direct-labor capacity at available work stations. The selling price and costs associated with All Sports' tackle boxes are as follows 95.00 Selling price per box Costs per box: $20.00 Molded plastic Hinges, latches, handle Direct labor ($15.00 per 10.00 18.00 12.60 19.00 79.60 hour) Manufacturing overhead Selling and administrative cost Profit per box $15.40 Because All Sports' sales manager believes the firm could sell 24,000 tackle boxes if it had sufficient manufacturing capacity, the company has looked into the possibility of purchasing the tackle boxes for distribution. Maple Products, a steady supplier of quality products, would be able to provide up to 17,500 tackle boxes per year at a price of $76.00 per box delivered to All Sports' facility All Sports' production manager has come to the conclusion that the company could make better use of its Plastics Department by manufacturing skateboards. Adler has a market study that indicates an expanding market for skateboards and a need for additional suppliers. Adler believes that All Sports could expect to sell 30,000 skateboards annually at a price of $57 per skateboard