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 20 tubes for $7 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $84,360 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 114,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box:

Direct material	$5.1
Direct labor	3.8
Manufacturing overhead	3.1
Total cost	$12.0

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 $1.31 per box of 20 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 9% and direct materials costs would be reduced by 29%.

Requirement:

What is the maximum price that Silven Industries should be willing to pay the outside supplier per dozen cartridges?(Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Maximum price

$per box

Requirement:

Instead of sales of 114,000 boxes, revised estimates show a sales volume of 137,000 boxes. At this new volume, additional equipment must be acquired to manufacture the tubes at an annual rental of $52,000. Calculate the cost under the three alternatives.(Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

(a)	Total cost to produce all tubes internally

Cost

$

(b)	Purchase all cartridges externally:

Cost

$

(c)	Produce 114,000 boxes of tubes internally, and purchase 23,000 boxes of tubes externally:

Cost

$