Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided to diversity 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-om 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 $11 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $80,000 charge for fived 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 manufacturing cost per box Direct material Direct labor Manufacturing overhead Total cont $4.60 3.00 $9.50 The costs above relate to making both the balm and the tube that contains It As an aterative 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 $170 per box of 24 tubes. If Seven 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 25% Required: 11 Silven buys its tubes from the outside supplier how much of its own Chap-Off manufacturing costs per box will be able to avoid? (Hint You need to separate the manufacturing overhead of $190 per box that is shown above into its variable and feed components to derive the correct answer 2. What is the financial advantage disadvantage per box of Chap-Off Siven buy its tubes from the outside supplier 3. What is the financial advantage disadvantage in total (not per bod Siiven buys 100.000 boxes of tubes from the outside supoller? 4. Should Silven Industries make or buy the tubest 5. What is the maximum price that Sven should be willing to pay the outside supplier for a box of 24 tubes 6. Instead of sales of 100.000 boxes of tubes, revised estimates show a sales volume of 125.000 boxes of tubes. At this higher sales volume, Silver would need to rent extra equipment at a cost of $45.000 per year to make the additional 25.000 boxes of tubes Assuming that the outside supoler will not accept an order for less than 125.000 boxes of tubes, what is the financial advantage (disadvantage in total not per bonit Stiven Duy's 125.000 boxes of tubes from the outside Supoiler? 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 $170 per box How many boxes of tubes should Sven make? How many bones of tubes should it buy from the outside supoller? 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 $190 per box that is shown above into its variable and foved components to derive the correct answer.) 2 What is the financial advantage (disadvantage) per box of Chop-ot ir Silven buys its tubes from the outside supplier! 3. What is the financial advantage disadvantage) in total (not per box If Silven buys 100.000 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 100,000 boxes of tubes, revised estimates show a sales volume of 125,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $45,000 per year to make the additional 25.000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 125.000 boxes of tubes, what is the financial advantage disadvantage) in total (not per box if Silven buys 125,000 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 wil accept an order of any size for the tubes at a price of $170 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. Hei Reg 2 Rega Reg 4 Reg Reg 6 Reg 7 If Silven buys its tubes from the outside supplies 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 $1.90 per box that is shown above into its variable and found components to derive the correct ave) (Do not round intermediate calculations. Round your answer to 2 decimal place. Show less Aveidataran tacturing contrace Chap-Off Reg 2 >
