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Problem 11-23 Make or Buy Decision [LO11-3] Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repelients, 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 baim that will be sold in a lipstick-type tube. The product will be sold to wholesalers in boxes of 24 tubes for $10 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. Howevet, a $128,000 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 160,000 boxes of Chap-Oft, the Accounting Department has developed the following manufacturing cost per box: The costs above relate to making both the lip baim and the tube that contains it. As an alternative 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 $1.40 per box of 24 tubes. If Silven 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 20% Required: 1. If Siven 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 $2.00 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Oif if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160,000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of fubes. Assuming that the outside supplier will not accept an order for less than 197,000 boxes of tubes, what is the financiat advantage (disadvantage) in total (not per box) if Silven buys 197,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? 7. Refer to the dota in (6) above. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.40 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. If Salven buys its tubes from the outside Supplier, how much of its own Chap-Olf manufacturing costs per box wili it be able to avold? (Hint: You need to separate the manufacturing owerhead of $2.00 per box that is shown above into its variable and fored components to derive the correct answer.) (Do not round intermediate calculotions. Round your answer to 2 decimal places.) Required: 1. If Siven buys its tubes from the outside supplier, how much of its own Chap-Oft manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $2.00 per box that is shown above into its variable and fixed components to derlve the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160,000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Siven buys 197,000 boxes of tubes from the outside supplier? Glven 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 $1,40 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. What is the financial advantage (disadvantage) per box of Chap-off if Silven burs its tubes from the outside supplier? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Required: 1. If Siven 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 $2.00 per box that is shown above into its variable and foxed components to derive the correct answec) 2. What is the financial advantage (disadvantage) per box of Chap-Orf if Silven buys its tubes from the outside supplier? 3. What is the financlal advantage (disadvantage) in total (not per box) if Silven buys 160,000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes, At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplier witit not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Siven buys 197,000 boxes of tubes from the outside supplier? Given this new information, should Stlven Industries make or buy the tubes? 7. Refer to the data in (6) above. Assume that the outside supplier witl accept an order of any size for the tubes at a price of $1.40 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. What is the financial advantage (disadvantage) in total (not per box) if Siven buys 160,000 boxes of tubes from the outside supplier? 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 $2.00 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160,000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 197,000 bokes of tubes, what is the financial advantage (disadvantage) in fotal (not per box) if Silven buys 197,000 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 $1.40 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. Should Silven Industries make or buy the tubes? Required: 1. If Siven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avold? (Hint: You need to separate the manufacturing overthead of $2.00 per box that is shown above into its variable and fixed components to derive the correct answee) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160.000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of fubes. Assuming that the outside supplier will not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 197,000 boxes of tubes from the outside supplier? Glven 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 $1.40 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. 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 caiculations. Round youe answer to 2 decimal places.) Required: 1. If Siven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be abie to avoid? (Hint You need to separate the manufacturing overhead of $2.00 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Siven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160,000 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher 5 ales volume, Slven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Siven buys 197,000 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 $1.40 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. Instead of sales of 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplet will not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if 5 tiven buys 197,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? (Round your intermediate calculations to 2 . decimal placess.) Required: 1. If Siven 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 $2.00 per box that is shown above into its variable and fixed components to derlve the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 160,000 boxes of tubes from the outside supplier? 4. Should Sliven 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 160,000 boxes of tubes, revised estimates show a sales volume of 197,000 boxes of tubes, At this higher sales volume, Silven would need to rent extra equipment at a cost of $57,000 per year to make the additional 37,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 197,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 197,000 boxes of tubes from the outside supplier? Given this new information, should Siven industries make or buy the fubes? 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 $1.40 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. 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 $1.40 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.)

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