Bo Vonderweldt, the production manager for Sportway, had requested to have lunch with the company president. Vonderweldt wanted to put forward his suggestion to add a new product line. As they finished lunch, Meg Thomas, the company president, said, "I'll give your proposal some serious thought, Bo. I think you're right about the increasing demand for skateboards. What I'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." Vonderweidt 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." Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores. About 60 percent of Sportway's products are purchased from other companies while the remainder of the products are manufactured by Sportway. The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes. Sportway is able to manufacture and sell 9,000 tackle boxes annually, making full use of its direct-labor capacity at available work stations. The selling price and costs associated with Sportway's tackle boxes are as follows: Selling price per box Costs per box: Molded plastic Hinges, latches, handle. $106.00 $16.00 11.00 22.50 14.25 Selling and administrative cost 16.00 79.75 Profit per box $ 26.25 Direct labor ($18.00 per hour) Manufacturing overhead