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, Silvens 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 $9 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $116,000 charge for fixed manufacturing overhead will be absorbed by the product under the companys absorption costing system.

Using the estimated sales and production of 145,000 boxes of Chap-Off, the Accounting Department has developed the following manufacturing cost per box:

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 145,000 boxes of tubes, revised estimates show a sales volume of 179,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 34,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 179,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 179,000 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 (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.65 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier?

Direct material $3.90 Direct labor 2.20 Manufacturing overhead 1.70 $7.80 Total cost Complete this question by entering your answers in the tabs below. Req 7 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Maximum price per box Req 4 Req 6 Complete this question by entering your answers in the tabs below. Req 3 Req 1 Req 2 Req 4 Req 5 Req 6 Req 7 Instead of sales of 145,000 boxes of tubes, revised estimates show a sales volume of 179,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 34,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 179,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 179,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? Show less A Make or buy the boxes of tubes? Req 5 Req 7 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Refer to the data in (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.65 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 Req 6 Req 7 Direct material $3.90 Direct labor 2.20 Manufacturing overhead 1.70 $7.80 Total cost Complete this question by entering your answers in the tabs below. Req 7 Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Maximum price per box Req 4 Req 6 Complete this question by entering your answers in the tabs below. Req 3 Req 1 Req 2 Req 4 Req 5 Req 6 Req 7 Instead of sales of 145,000 boxes of tubes, revised estimates show a sales volume of 179,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 34,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 179,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 179,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? Show less A Make or buy the boxes of tubes? Req 5 Req 7 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6 Req 7 Refer to the data in (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.65 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 Req 6 Req 7