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 24 tubes for $8 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $60,000 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 120,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box:
Direct Materials $3.90
Direct labor 1.90
Manufacturing overhead 1.30
Total cost $7.10
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 $1.40 per box of 24 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and direct materials costs would be reduced by 25%.
1a. Calculate the total variable cost of producing one box of chap-off
1b. Assume that the tubes for the chap off are purchased from the outside supplier, calculate the total variable cost of producing one box of chap-off
1c. Should Silven Industries make or buy the tubes?
A) Make
B) Buy
2. What would be the maximum purchase price acceptable to Silven Industries?

1a. $6.60

1b. $6.76

1c. Silven Industries should make the tubes for this cost $0.16 less than purchasing

2.  $1.24

Explanation:

1a. Calculation total variable cost of producing one box of chap-off (24)

Note :  No additional fixed manufacturing overhead costs will be incurred to produce the product

Direct Materials                                        3.90

Direct labor                                               1.90

Manufacturing overhead (1.30 -0.50)     0.80

Total                                                          6.60

1b Calculation of the total variable cost of producing one box of chap-off

Purchase of Tubes                                             1.40

Direct Materials (3.90× 75%)                             2.93

Direct labor ( 1.90× 90%)                                    1.71

Manufacturing overhead (1.30 -0.50) × 90%   0.72

Total                                                                   6.76

1c Consider incremental cost per unit

Total incremental cost = 6.76 - 6.60

                                     = $0.16

Therefore Silven Industries make the tubes for this cost $0.16 less than purchasing

2.

Maximum purchase price acceptable to Silven Industries

Purchase of Tubes                                             1.24

Direct Materials (3.90× 75%)                             2.93

Direct labor ( 1.90× 90%)                                    1.71

Manufacturing overhead (1.30 -0.50) × 90%   0.72

Total                                                                   6.60

The Overall total cost must not exceed the $6.60 of making Internally -

Thus,Working from Back - Wards the maximum price acceptable to Silven Industries is $1.24

b. a single paragraph.

a paragraph is a series of sentences that are organized and make sense, and are all related to a single topic . almost every piece of writing you do that is longer than a few sentences should be organized into paragraphs. this is because paragraphs show a reader where the subdivisions of an essay begin and end, and thus the reader see the organization of the essay into subjects in order to be able to understand its main points.

answer; organizational;