The Waterway Outdoors Corporation, which produces a highly successful line of summer lotions and insect repellents and sells them to wholesalers, has decided to diversify in order to stabilize its 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, the company has developed a winter products line. However, because of the conservative nature of company management, the president has decided to introduce only one of the new products for this coming winter. If the product is a success, there will be further expansion in future years. The product selected is a lip balm to be sold in a lipstick-type tube. The company will sell the product to wholesalers in boxes of 25.00 tubes for $20.00 per box. Because of available capacity, the company will incur no additional fixed charges to produce the product. However, to allocate a fair share of the companys present fixed costs to the new product, the product will absorb a $125,000 fixed charge. Using the estimated sales and production of 100,000 boxes of lip balm as the standard volume, the accounting department has developed the following costs per box of 25.00 tubes:

Direct labour		$4.20
Direct materials		5.85
Total overhead		2.85
Total		$12.90

Waterway Outdoors has approached a cosmetics manufacturer to discuss the possibility of purchasing the tubes for the new product. The purchase price of the empty tubes from the cosmetics manufacturer would be $1.95 per 25.00 tubes. If Waterway Outdoors accepts the purchase proposal, it is estimated that direct labour and variable overhead costs would be reduced by 10% and direct materials costs would be reduced by 20%.

Should Waterway Outdoors make or buy the tubes? (Round answers to 2 decimal places, e.g. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).)

		Make (Per Box)		Buy (Per Box)		Net Income Increase (Decrease)
select an item Total costDirect materialsPurchase priceDirect labourVariable overheads		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Purchase priceDirect labourDirect materialsVariable overheadsTotal cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Total costPurchase priceDirect labourVariable overheadsDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct labourTotal costVariable overheadsPurchase priceDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name for this statement Total costPurchase priceDirect labourVariable overheadsDirect materials		$enter a total amount		$enter a total amount		$enter a total amount

Waterway should select an option make/buy the tubes.