Silven Industries, which manufactures and sells a highlysuccessful line of summer lotions and insect repellents, hasdecided to diversify in order to stabilize sales throughout theyear. A natural area for the company to consider is the productionof winter lotions and creams to prevent dry and chapped skin. Afterconsiderable research, a winter products line has been developed.However, Silven’s president has decided to introduce only one ofthe new products for this coming winter. If the product is asuccess, further expansion in future years will be initiated. Theproduct selected (called Chap-Off) is a lip balm that will be soldin a lipstick-type tube. The product will be sold to wholesalers inboxes of 24 tubes for $10 per box. Because of excess capacity, noadditional fixed manufacturing overhead costs will be incurred toproduce the product. However, a $115,500 charge for fixedmanufacturing overhead will be absorbed by the product under thecompany’s absorption costing system. Using the estimated sales andproduction of 165,000 boxes of Chap-Off, the Accounting Departmenthas developed the following manufacturing cost per box: Directmaterial $ 4.70 Direct labor 3.00 Manufacturing overhead 2.10 Totalcost $ 9.80 The costs above relate to making both the lip balm andthe tube that contains it. As an alternative to making the tubesfor Chap-Off, Silven has approached a supplier to discuss thepossibility of buying the tubes. The purchase price of thesupplier's empty tubes would be $2.00 per box of 24 tubes. IfSilven Industries stops making the tubes and buys them from theoutside supplier, its direct labor and variable manufacturingoverhead costs per box of Chap-Off would be reduced by 10% and itsdirect materials costs would be reduced by 30%. Required: 1. IfSilven buys its tubes from the outside supplier, how much of itsown Chap-Off manufacturing costs per box will it be able to avoid?(Hint: You need to separate the manufacturing overhead of $2.10 perbox that is shown above into its variable and fixed components toderive the correct answer.) 2. What is the financial advantage(disadvantage) per box of Chap-Off if Silven buys its tubes fromthe outside supplier? 3. What is the financial advantage(disadvantage) in total (not per box) if Silven buys 165,000 boxesof tubes from the outside supplier? 4. Should Silven Industriesmake or buy the tubes? 5. What is the maximum price that Silvenshould be willing to pay the outside supplier for a box of 24tubes? 6. Instead of sales of 165,000 boxes of tubes, revisedestimates show a sales volume of 203,000 boxes of tubes. At thishigher sales volume, Silven would need to rent extra equipment at acost of $70,000 per year to make the additional 38,000 boxes oftubes. Assuming that the outside supplier will not accept an orderfor less than 203,000 boxes of tubes, what is the financialadvantage (disadvantage) in total (not per box) if Silven buys203,000 boxes of tubes from the outside supplier? Given this newinformation, should Silven Industries make or buy the tubes? 7.Refer to the data in (6) above. Assume that the outside supplierwill accept an order of any size for the tubes at a price of $2.00per box. How many boxes of tubes should Silven make? How many boxesof tubes should it buy from the outside supplier?