Check my work 4 3 shoes Silven Industries, which manufactures and sells a highly successfut line of summer lotions and insect repellents, has decided to diversity 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 chopped skin After considerable research, a winter products line has been developed. However, Silven's president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated The product selected called Chap OM is a lip balm that will be sold in a lipstick type tube. The product will be sold to wholesalers in boxes of 24 tubes for 511 per box Because of excess capacity, no additional foed manufacturing overhead costs will be incurred to produce the product. However, a 599,000 charge for fixed manufacturing overhead will be absorbed by the product under the company's absorption costing system Using the estimated sales and production of 110,000 boxes of Chap of the Accounting Department has developed the following manufacturing cost per box Direct terlal Direct 1 Manufacturing red Total con 5.5.10 3.40 2.30 $10.00 The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap Off Seven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the suppliers empty Tubes would be 5170 per box of 24 tubes Silven Industries stops making the tubes and buys them from the outside supplier is direct labor and variable manufacturing overhead costs per box of Chap Off would be reduced by 10% and its direct materials costs would be reduced by 20% mes Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap Off manufacturing costs per box will be able to avoid Hint You need to separate the manufacturing overhead of $230 per box that is shown above into its variable and foxed components to derive the correct answer) 2 What is the financial advantage (disadvantage) per box of Chap of Silven buys its tubes from the outside supplied 3. What is the financial advantage (disadvantage) in total (not per box) ir Silven buys 110.000 boxes of tubes from the outside supplier? 4 Should Silven Industries make or buy the tubes? 5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? 6. Instead of sales of 110.000 boxes of tubes, revised estimates show a sales volume of 150.000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60.000 per year to make the additional 40,000 boxes of tubes Assuming that the outside supplier will not accept an order for less than 150.000 boxes of tubes. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 150,000 boxes of tubes from the outside supplier? Given this new information should Silven Industries make or buy the tubes? 7 Refer to the data in Required 6. Assume that the outside supplier will accept an order of any size for the tubes at a price of $170 per bax How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Check my work 4 3 shoes Silven Industries, which manufactures and sells a highly successfut line of summer lotions and insect repellents, has decided to diversity 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 chopped skin After considerable research, a winter products line has been developed. However, Silven's president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated The product selected called Chap OM is a lip balm that will be sold in a lipstick type tube. The product will be sold to wholesalers in boxes of 24 tubes for 511 per box Because of excess capacity, no additional foed manufacturing overhead costs will be incurred to produce the product. However, a 599,000 charge for fixed manufacturing overhead will be absorbed by the product under the company's absorption costing system Using the estimated sales and production of 110,000 boxes of Chap of the Accounting Department has developed the following manufacturing cost per box Direct terlal Direct 1 Manufacturing red Total con 5.5.10 3.40 2.30 $10.00 The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap Off Seven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the suppliers empty Tubes would be 5170 per box of 24 tubes Silven Industries stops making the tubes and buys them from the outside supplier is direct labor and variable manufacturing overhead costs per box of Chap Off would be reduced by 10% and its direct materials costs would be reduced by 20% mes Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap Off manufacturing costs per box will be able to avoid Hint You need to separate the manufacturing overhead of $230 per box that is shown above into its variable and foxed components to derive the correct answer) 2 What is the financial advantage (disadvantage) per box of Chap of Silven buys its tubes from the outside supplied 3. What is the financial advantage (disadvantage) in total (not per box) ir Silven buys 110.000 boxes of tubes from the outside supplier? 4 Should Silven Industries make or buy the tubes? 5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? 6. Instead of sales of 110.000 boxes of tubes, revised estimates show a sales volume of 150.000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60.000 per year to make the additional 40,000 boxes of tubes Assuming that the outside supplier will not accept an order for less than 150.000 boxes of tubes. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 150,000 boxes of tubes from the outside supplier? Given this new information should Silven Industries make or buy the tubes? 7 Refer to the data in Required 6. Assume that the outside supplier will accept an order of any size for the tubes at a price of $170 per bax How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier