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-Off, Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $2.30 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would be reduced by 30%. Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $2.30 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 120,000 boxes of tubes from the outside supplier? 4. Should Silven Industries make or buy the tubes?
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-Off, Silven has approached a supplier to discuss the possibility of buying the tubes. The purchase price of the supplier's empty tubes would be $2.30 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would be reduced by 30%. Required: 1. If Silven buys its tubes from the outside supplier, how much of its own Chap-Off manufacturing costs per box will it be able to avoid? (Hint: You need to separate the manufacturing overhead of $2.30 per box that is shown above into its variable and fixed components to derive the correct answer.) 2. What is the financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier? 3. What is the financial advantage (disadvantage) in total (not per box) if Silven buys 120,000 boxes of tubes from the outside supplier? 4. Should Silven Industries make or buy the tubes?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 2PA: The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped...
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