Problem 13-23 (Algo) Make or Buy Decision (LO13-3) Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided to diversify 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 chapped 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-Off) 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 $8 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $84,000 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 105,000 boxes of Chap-off, the Accounting Department has developed the following manufacturing cost per box Direct material Direct labor Manufacturing overhead Total cost $3.80 2.20 1.50 $7.50 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 Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $1.40 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its 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% Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed components to derive the correct answer.) - 1. 1 Silven buys its tubes from the outside supplier, how much of its own Chap Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 105,000 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advantage (disadvantage) In total (not per box) if Silven buys 126,000 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 $1.40 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6 Reg 2 If Silven buys its tubes from the outside supplier, how much of its own Chap-off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed components to derive the correct answer.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Show less Avoidable manufacturing costa per box of Chap-on Req2 > fixed compon Chap-Off if Silven buys its tubes from the outside supplier? age (disadvantage) in total (not per box) if Silven buys 105,000 boxes of tubes from the outside sup 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this higher sale volume, Sliven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21.000 boxes of tubes, Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 126,000 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 $1.40p box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Reg 1 ileg 2 Reg 3 Reg 4 Reg 5 Reg 6 Req7 What is the financial advantage (disadvantage) per box of Chap-off if Silven buys its tubes from the outside supplier? (Do not round intermediate calculations. Round your answer to 2 decimal places.) per box Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to av (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed componen derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 105,000 boxes of tubes from the outside supp 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this higher sale volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21.000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 126,000 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 $1.40 pe box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Req1 Reg 2 Red 3 Reg 4 Reg 5 Reg 6 Reg. 7 What is the financial advantage (disadvantage) In total (not per box) if Silven buys 105,000 boxes of tubes from the outside supplier? reduced by 20%. Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fix derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplie 3. What is the financial advantage (disadvantage) in total (not per box) If Silven buys 105,000 boxes of tubes from the 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21,000 boxes Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial ac (disadvantage) in total (not per box) if Silven buys 126,000 boxes of tubes from the outside supplier? Given this new info 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 pric box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg Reg 5 Reg 6 Reg z Should Silven Industries make or buy the tubes? Make OBuy 1.1 Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 105,000 boxes of tubes from the outside suppller? 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21,000 boxes of tubes Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 126,000 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 $1.40 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg 5 Reg 6 . Reg 7 Instead of sales of 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) ir Silven buys 126,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? Show less Make or buy the boxes of tubes? UITS Own Chap-Off manufacturing costs per box will it be a w separate the manufacturing overhead of $1.50 per box that is shown above into its variable and fixed derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 105,000 boxes of tubes from the outsi 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 105,000 boxes of tubes, revised estimates show a sales volume of 126,000 boxes of tubes. At this hic volume, Silven would need to rent extra equipment at a cost of $50,000 per year to make the additional 21,000 boxes of tu Assuming that the outside supplier will not accept an order for less than 126,000 boxes of tubes, what is the financial advar (disadvantage) in total (not per box) if Silven buys 126,000 boxes of tubes from the outside supplier? Given this new informa 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 on box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 Reqs Reg 6 Req 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 $1.40 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier? (Round your intermediate calculations to 2 decimal places.) Number of boxes of tubes manufactured by Silven Number of boxes of tubes purchased from the outside supplier