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Silven Industries, which manufactures and sells summer lotions and insect repellents, has decided to diversify...

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Accounting

Silven Industries, which manufactures and sells 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, Silven developed a new lip balm called Chap-Off that is sold to wholesalers in boxes of 24 tubes for $13 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce Chap-Off. However. a $96,000 charge for fixed manufacturing overhead will be absorbed by the product under the company's absorption costing system.
Using estimated sales and production of 120,000 boxes of Chap-Off, the Actounting Department developed the following manufacturing cost per box:
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