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 12 tubes for $5.90 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $100,000 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 100,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box: Direct materials Direct labor Manufacturing overhead $2.00 1.00 1.40 Total cost $4.40 The costs above include costs for producing both the lip balm and the tube that contains it. As an alternative to making the tubes, Silven has approached a supplier to discuss the possibility of purchasing the tubes for Chap-Off. The purchase price of the empty tubes from the supplier would be $0.70 per box of 12 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and direct materials costs would be reduced by The costs above include costs for producing both the lip balm and the tube that contains it. As an alternative to making the tubes, Silven has approached a supplier to discuss the possibility of purchasing the tubes for Chap-Off. The purchase price of the empty tubes from the supplier would be $0.70 per box of 12 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and direct materials costs would be reduced by 20% Required: 1a. Calculate the total variable cost of producing one box of Chap-Off. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Total variable cost per box 1b. Assume that the tubes for the Chap-Off are purchased from the outside supplier, calculate the total variable cost of producing one box of Chap-Off. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Total variable cost per box 1c. Should Silven Industries make or buy the tubes? O Make Buy 2. What would be the maximum purchase price acceptable to Silven Industries? (Do not round intermediate calculations. Round your answer to 2 decimal places.) maximum purchase price per box of tubes 3. Instead of sales of 100,000 boxes, revised estimates show a sales volume of 116,000 boxes. At this new volume, additional equipment must be acquired to manufacture the tubes at an annual rental of $24,000. Assume that the outside supplier will not accept an order for less than 116,000 boxes. a. Calculate the total relevant cost of making 116,000 boxes and total relevant cost of buying 116,000 boxes. (Do not round intermediate calculations.) Making Buying Total cost The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit. Demand for the dolls is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Product Debbie Trish Sarah Mike Sewing kit Demand Selling Next year Price Direct Direct (units) per Unit Materials Labor 72,000 $18.00 $4.90 $4.05 64,000 $ 6.50 $1.80 $1.89 57,000 $30.00 $9.74 $6.75 40,000 $15.00 $4.20 $4.95 347,000 $ 10.20 $5.40 $1.44 The following additional information is available: a. The company's plant has a capacity of 155,110 direct labor-hours per year on a single- shift basis. The company's present employees and equipment can produce all five products. b. The direct labor rate of $9 per hour is expected to remain unchanged during the coming year. c. Fixed costs total $605,000 per year. Variable overhead costs are $5 per direct labor- d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. hour. Required: 1. Determine the contribution margin per direct labor-hour expended on each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Required: 1. Determine the contribution margin per direct labor-hour expended on each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Product Contribution Margin per DLH Debbie Trish Sarah Mike Sewing kit 2. Calculate the the total direct labor-hours that will be required to produce the units estimated to be sold during the coming year. (Do not round intermediate calculations.) Total Hours Product Debbie Trish Sarah Mike Sewing Kit Total hours required 0 3. Based on response to Requirement 1 & 2, how much of 155,110 direct labor hours of capacity will be allocated to Walton Toy Company's various products? Hours Product Debbie Trish Sarah Mike Sewing kit 4. What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? Total contribution margin 5. What is the highest price, in terms of a rate per hour, that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Highest price per hour