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PaxoSmithKline manufactures toothpaste and mouthwash targeted at people with sensitive teeth under the brand name Freshodyne. Due to an increase in the number of young

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PaxoSmithKline manufactures toothpaste and mouthwash targeted at people with sensitive teeth under the brand name Freshodyne. Due to an increase in the number of young children suffering from sensitive teeth, the company is introducing a children's range called Sensocare. To date, two products have been developed but the Dental board has approved only one. The approved product, Care mouthwash, will be sold to major retailers in boxes of 24 bottles for R800. No additional fixed cost will be incurred to produce the toothpaste, but R1 000000 of the company's fixed cost will be absorbed by the product. The following information is available: - Estimated sales and production is 10000 boxes - Total production cost of the toothpaste per box (including the cost of bottles and the toothpaste) is as follows: - Bottles can also be purchased from an external supplier at R110 per box - Purchasing bottles from an external supplier will decrease direct labour and variable overheads by 10% and direct material cost by 20%. REQUIRED: 4.1 Advise management, based on quantitative factors (financial factors), on (7) whether PaxoSmithKline should make or buy the tubes

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