Business
Business, 03.04.2020 02:37, lakeithiat1320

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 21 tubes for $6 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $90,440 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 119,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box:

Direct material $5.5

Direct labor 2.8

Manufacturing overhead 1.5

Total cost $9.8

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 $1.26 per box of 21 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 6% and direct materials costs would be reduced by 33%.

Requirement 1:

(a) Calculate the total variable cost of one box of Chap-Off if the company manufactures all of its own tubes from start to finish.
(b) Calculate the total variable cost of one box of Chap-Off if the tubes are purchased from the outside supplier.

(c) Should Silven Industries accept the outside supplier's offer?
Requirement 2:

What is the maximum price that Silven Industries should be willing to pay the outside supplier per dozen cartridges?

Requirement 3:

Instead of sales of 119,000 boxes, revised estimates show a sales volume of 127,000 boxes. At this new volume, additional equipment must be acquired to manufacture the tubes at an annual rental of $50,000. Calculate the cost under the three alternatives. (Round your answers to the nearest dollar amount.

(a) Total cost to produce all tubes internally

(b) Purchase all cartridges externally:

(c) Produce 119,000 boxes of tubes internally, and purchase 8,000 boxes of tubes externally:

answer
Answers: 2

Other questions on the subject: Business

image
Business, 22.06.2019 11:10, chloeholt123
Which of the following is an example of a production quota? a. the government sets an upper limit on the quantity that each dairy farmer can produce. b. the government sets a price floor in the market for dairy products. c. the government sets a lower limit on the quantity that each dairy farmer can produce. d. the government guarantees to buy a specified quantity of dairy products from farmers.
Answers: 2
image
Business, 22.06.2019 19:10, jonmorton159
The stock of grommet corporation, a u. s. company, is publicly traded, with no single shareholder owning more than 5 percent of its outstanding stock. grommet owns 95 percent of the outstanding stock of staple inc., also a u. s. company. staple owns 100 percent of the outstanding stock of clip corporation, a canadian company. grommet and clip each own 50 percent of the outstanding stock of fastener inc., a u. s. company. grommet and staple each own 50 percent of the outstanding stock of binder corporation, a u. s. company. which of these corporations form an affiliated group eligible to file a consolidated tax return?
Answers: 3
image
Business, 22.06.2019 19:40, thomasalmo2014
On april 1, santa fe, inc. paid griffith publishing company $2,448 for 36-month subscriptions to several different magazines. santa fe debited the prepayment to a prepaid subscriptions account, and the subscriptions started immediately. what amount should appear in the prepaid subscription account for santa fe, inc. after adjustments on december 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made?
Answers: 1
image
Business, 22.06.2019 21:50, princessmoon
Labor unions have used which of the following to win passage of favorable laws such as shorter work weeks and the minimum wage? a. strikes b. collective bargaining c. lobbying d. lockouts
Answers: 1
Do you know the correct answer?
Silven Industries, which manufactures and sells a highly successful line of summer lotions and insec...

Questions in other subjects: