Part A (5 Marks) Balm Inc., which produces and sells to wholesalers a highly successful line of summer lotions and insect repellents, has decided to diversify to stabilize sales throughout the year. After considerable research, a winter product line has been developed. One product selected (called the Realips) 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 $28 per box. Because of excess capacity available, no additional fixed charges will be incurred to produce the product. However, a $200,000 fixed charge will be allocated to it as its fair share of the company's present fixed costs. Using the estimated production and sales of 100,000 boxes as the expected volume, the accounting department has developed the following costs per box: Direct Material $6.00 Direct Labor 4.00 Total Overhead 3.20 Total $13.20 Balm has approached an outside cosmetics manufacturer to discuss the possibility of purchasing the tubes for Realips. The purchase price of the empty tubes from the outside cosmetics manufacturer would be $1.92 per box (of 24 tubes). If Balm accepts the purchase proposal, it predicts that direct material costs would be reduced by 20%, direct labor costs will be reduced by 10%, and variable overhead costs would be reduced by 10% Required: (a) Should the Balm Corporation make or buy the tubes? (3 marks) 1 (b) What would be the maximum purchase price acceptable to Balm for the tubes? (1 mark) (C) What qualitative factors should Balm consider in determining whether they should make or buy the tubes? (1 mark)