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Siven Industries, which manufactures and sells a highly successful ine of summer lotions and insect repellents, has dedded to diversity 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 diy and chapped skin After comidetable research, a winter products. Ine has been developed. However, Simen's president has dedded to introduce only one of the new products for this coming wintetIf the product is a succes, further expansion in future years will be initiated The product selected called Chap Onl) is a lp balm that will be sold in a slick type tube. The product will be sokl to wholesalers in boxes of 24 tubes for $9 pet box. Because of excess capacity, no additional fixed manufacturing over head costs will be incurred to produce the product. However, a $116,000 charge for lived manufacturing overhead will be absorbed by the product under the company's absorption costing system. Using the estimated sakis and production of 145.000 boxes of Chap Oll the Accounting Department has developed the following manulacturing cosi per boc Direct sterial Direct labor Manufacturing overhead Total cost 1). 2.2 1. The costs above relate to making both the lip balm and the tube that contains it. As an alternative to making the tubes for Chap On Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the suppler's emply tubes would be $165 per box of 24 lubes. If Silven Industries stops making the tubes and buys them from the outside supplier is direct labor and variable manufacuting overhead costs per box of Chap Oll would be reduced by 10% and its direct material costs would be reduced by 30% Required: 1.it Siven buys its tubes from the outside supplet how much of its own Chap Of manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing over head of $170 per box that is shown above into its vortable and fived components to derive the correct answer) 2. What is the financial advantage (disadvantage per box of Chap Of Silver buys its tubes from the outside suppler? 3. What is the financial advantage disadvantage in total (not per bow Sive buys 105.000 boxes of tubes trom the outude suppler? 4. Should Silven Industries make or buy the tubes? 5. What is the maximum price that Silven should be willing to pay the outside supplied for a box of 24 tubes 6. Instead of sales of 145.000 bones of tubes, revised estimates show a sales volume of 179.000 boxes of tubes. Althigher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 34.000 bowers of tubes Assuming that the outside supplier will not accept an order for less than 179.000 boxes of Tubes what is the finandal advantage disadvantages in total (not pet box) il Silven buys 179.000 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 Required 6. Assume that the outside suppler will accept an order of any size for the tubes at a price of $165 per box. How many boxes of tubes should Silven make? How many boyes of tubes should it buy from the outside supplier

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