Silven Industries, which manufactures and sells a highly successful line of summer

QUESTION

.9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>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 24 tubes for $7 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $72,000 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 120,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box: .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””> Direct materials$3.80 Direct labor1.60 Manufacturing overhead1.00 Total cost$6.40.9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>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 $1.30 per box of 24 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 25%. .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>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.)e}ru:tn”ioatidaleVblTartta”se,ru:td”rewenssA”i”,:”n”ioptriscdeb_ta,”{}”:62″_],[0″:67″_l,ul:n1″_5,”llnu”:26″_},:{2″_3,”seal:f2″_4,”-1″:50″_1,:-4″_2,”-1″:31″_0,”:_5,”:04″”_e,lsfa”:48″_},:{7″_3,”}]18:37″_7,”59″:34″_[{“:23″_e,ru:t5″_4,”1″leit%20Tew”N”:mena,”}]seal:f7″_4,”:14″_5,”[]”:33″_},3″”6″:c2,”8″”8″:c1,”5″12:”0″”c:{9″_1,””}23:”0″{“”:59″_],}]}}N”IOSTUE”Q”:76″_:{5″_5,”}}”””:79″_”,ox%20ber”p”:75″_:{0″_3{“”:_2{“”:20″_,{}}e”nspoes%20rermbNulety”s”:_7,””}htig”r”:68″_e,ru:t3″_4,”N”IOUTOL”S”:76″_:{5″_5,”}}%24″:”1″_8,”:23″_5,”:21″_2,”uetr”:63″_:{5″_5,”Y”NCREUR”C”:73″_:{9″_2,”}}”””:75″_:{0″”_},”””:79″_”,c~ov~t:”5″_7{“”:56″_},”””:79″_”,:”5″_7{“”:30″_:{2″”_:{0″_2{“},”})%3B11%2023,16,%2037(1gb%20rr:locod-unrokgac”b”:_8,””}1)21,%2063%2017,13b(rg:”9″”_”,ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”t”os%20cleabrival%20taTo:”5″_7{“”:30″_:{2″”_:{0″_2{“[[“:13″_e,lsfa”:41″_},n”owpDro”d”:27″_1,:-5″_2,”{}”:75″_e,lsfa”:82″_:{8″_2,””””:22″_e,lsfa”:35″_e,ru:t6″_3,”{}”:55″_”,leab%20TedtltiUn:”9″_6,”:37″_1,”:18″_5{“:[5″_6{” .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>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.)e}ru:tn”ioatidaleVblTartta”se,ru:td”rewenssA”i”,:”n”ioptriscdeb_ta,”{}”:62″_],[0″:67″_l,ul:n1″_5,”llnu”:26″_},:{2″_3,”seal:f2″_4,”-1″:50″_1,:-4″_2,”-1″:31″_0,”:_5,”:04″”_e,lsfa”:48″_},:{7″_3,”}]18:37″_7,”59″:34″_[{“:23″_e,ru:t5″_4,”1″leit%20Tew”N”:mena,”}]uetr”:47″_1,”:54″_],:[3″_3,””}63:”2″”c”,88:”1″”c”,25″1″:c0{“”:19″_},3″”2″:”0:{9″_5,”]]}}”}ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”x”bor%20pe:”5″_7{“”:30″_:{2″”_:{0″_2{“},”}seonsprer%20beumeNylst:”7″”_},t”ghri:”8″_6,”uetr”:43″_”,ONTILUSO:”6″_7{“”:55″_},”}”%24″:81″_2,”:53″_2,”:21″_e,ru:t3″_6{“”:55″_”,CYENRRCU:”3″_7{“”:29″_},”}414.:”5″_7{“”:_0,””}:”9″_7,”~”c1ov~t:”5″_7{“”:56″_},”””:79″_”,:”5″_7{“”:30″_:{2″”_:{0″_2{“},”})%3B11%2023,16,%2037(1gb%20rr:locod-unrokgac”b”:_8,””}1)21,%2063%2017,13b(rg:”9″”_”,ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”t”os%20cleabrival%20taTo:”5″_7{“”:30″_:{2″”_:{0″_2{“[[“:13″_e,lsfa”:41″_},n”owpDro”d”:27″_1,:-5″_2,”{}”:75″_e,lsfa”:82″_:{8″_2,””””:22″_e,lsfa”:35″_e,ru:t6″_3,”{}”:55″_”,leab%20TedtltiUn:”9″_6,”:37″_1,”:18″_5{“:[5″_6{” .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>1c.Should Silven Industries make or buy the tubes?MakeBuy .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>2.What would be the maximum purchase price acceptable to Silven Industries?(Do not round intermediate calculations. Round your answer to 2 decimal places.)e}ru:td”rewenssA”i”,:”n”ioptriscdeb_ta,”{}”:62″_],[0″:67″_l,ul:n1″_5,”llnu”:26″_},:{2″_3,”seal:f2″_4,”-1″:50″_1,:-4″_2,”-1″:31″_0,”:_5,”:04″”_e,lsfa”:48″_},:{7″_3,”}]58:37″_7,”59″:34″_[{“:23″_e,ru:t5″_4,”1″leit%20Tew”N”:mena,”}]seal:f7″_4,”:14″_5,”[]”:33″_},3″”6″:c2,”8″”8″:c1,”5″16:”0″”c:{9″_1,””}23:”0″{“”:59″_],}]}}N”IOSTUE”Q”:76″_:{5″_5,”}}”””:79″_”,ox%20ber”p”:75″_:{0″_3{“”:_2{“”:20″_,{}}e”nspoes%20rermbNulety”s”:_7,””}htig”r”:68″_e,ru:t3″_4,”N”IOUTOL”S”:76″_:{5″_5,”}}%24″:”1″_8,”:23″_5,”:21″_2,”uetr”:63″_:{5″_5,”Y”NCREUR”C”:73″_:{9″_2,”}}”””:79″_”,a~tc”~”:75″_:{6″_5,””}:”9″_7,””””:75″_:{0″_3{“”:_2{“”:20″_,{}}%3B”1)21,%2063%2017,13b(rg:%20orol-cndougrckba:”8″”_},)”11%2023,16,%2037(1gb”r”:_9,”N”IOSTUE”Q”:76″_:{5″_5,”}}”””:79″_”,ceri%20pseharcpum%20muxima:”5″_7{“”:30″_:{2″”_:{0″_2{“[[“:13″_e,lsfa”:41″_},n”owpDro”d”:27″_1,:-5″_2,”{}”:75″_e,lsfa”:82″_:{8″_2,””””:22″_e,lsfa”:35″_e,ru:t6″_3,”{}”:55″_”,leab%20TedtltiUn:”9″_6,”:37″_1,”:18″_5{“:[5″_6{” .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>3.Instead of sales of 120,000 boxes, revised estimates show a sales volume of 160,000 boxes. At this new volume, additional equipment must be acquired to manufacture the tubes at an annual rental of $58,000. Assume that the outside supplier will not accept an order for less than 160,000 boxes..9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>a.Calculate the total relevant cost of making 160,000 boxes and total relevant cost of buying 160,000 boxes.(Do not round intermediate calculations.)}uetr”:ederswAnis,””””:ontiipcres_dab”t},:{2″_6,”0]:[7″_6,”llnu”:51″_l,ul:n6″_2,”{}”:32″_e,lsfa”:42″_1,:-0″_5,”-1″:24″_1,:-1″_3,”:05″”_0,”:_4,”seal:f8″_4,”{}”:37″_],7}30″:77″_2,:84″_3{“:[3″_2,”uetr”:45″_”,e1tlTiw%20Ne:”e”am”n],e}lsfa”:47″_2,”:54″_],:[3″_3,””}89:”2″”c”,89:”1″”c”,87:”0″”c:{9″_1,””}23:”1″,”3″”2″:”0:{9″_5,”]]}}e”nspoes%20rermbNulety”s”:_7,””}htig”r”:68″_e,ru:t3″_4,”N”IOUTOL”S”:76″_:{5″_5,”}}%24″:”1″_8,”:23″_5,”uetr”:63″_:{5″_5,”Y”NCREUR”C”:73″_:{9″_2,”}}”””:79″_”,2~ca~v:”5″_7{“”:56″_},”””:79″_”,:”5″_7{“”:30″_:{2″”_:{0″_2{“},”}seonsprer%20beumeNylst:”7″”_},t”ghri:”8″_6,”uetr”:43″_”,ONTILUSO:”6″_7{“”:55″_},”}”%24″:81″_2,”:53″_e,ru:t3″_6{“”:55″_”,CYENRRCU:”3″_7{“”:29″_},”}:”9″_7,”~”a1tc”~”:75″_:{6″_5,””}:”9″_7,””””:75″_:{0″_3{“”:_2{“”:20″_,{}}”}ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”t”os%20calot”T”:75″_:{0″_3{“”:_2{“”:20″_[{],}}%3B”1)21,%2063%2017,13b(rg:%20orol-cndougrckba%3B%20px%200t:ennd-ixtte:”8″”_”,ldBolety%20serntCelety”s”:_7,””}1)21,%2063%2017,13b(rg:”9″”_e,ru:t0″_1,”r”teen”c”:68″_”,ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”g”inuy”B”:75″_:{0″_3{“”:_2{“”:20″_,{}}%3B”1)21,%2063%2017,13b(rg:%20orol-cndougrckba%3B%20px%200t:ennd-ixtte:”8″”_”,ldBolety%20serntCelety”s”:_7,””}1)21,%2063%2017,13b(rg:”9″”_e,ru:t0″_1,”r”teen”c”:68″_”,ONTIESQU:”6″_7{“”:55″_},”}:”9″_7,”g”inak”M”:75″_:{0″_3{“”:_2{“”:20″_,{}}%3B”1)21,%2063%2017,13b(rg:%20orol-cndougrckba:”8″”_},)”11%2023,16,%2037(1gb”r”:_9,”N”IOSTUE”Q”:76″_:{5″_5,”}}”””:79″_”,:”5″_7{“”:30″_:{2″”_:{0″_2{“[[“:13″_e,lsfa”:41″_},n”owpDro”d”:27″_1,:-5″_2,”{}”:75″_e,lsfa”:82″_:{8″_2,””””:22″_e,lsfa”:35″_e,ru:t6″_3,”{}”:55″_”,leab%20TedtltiUn:”9″_6,”:37″_1,”:28″_5{“:[5″_6{” .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>b.Based on the above calculations, should Silven Industries make or buy the boxes?MakeBuy .9px;=”” currentcolor;=”” 0px=”” 12px=”” sans-serif;=”” sans”,=”” “open=”” 24px=”” 14px=””>4.Refer to the data in (3) above. Assume that the outside supplier will accept an order of any size for the tubes at $1.35 per box. Which of these is the best alternative?Make all 160,000 boxesBuy all 160,000 boxesMake 120,000 boxes and buy 40,000 boxesMake 80,000 boxes and buy 80,000 boxes

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