Solution 1:
Total manufacturing overhead per unit at 155000 boxes = $1.90 per unit
Fixed manufacturing overhead per unit = $139,500 / 155000 = $0.90 per unit
Variable manufacturing overhead per unit = $1.90 - $0.90 = $1 per unit
Reduction in Chap-Off manufacturing costs per box, if tubes purchased from outside vendor = (Direct labor cost per unit + Variable manufacturing overhead per unit) * 10% + Direct material cost per unit * 25%
= ($2.60 + $1)*10% + ($4.30*20%) = $1.22 per unit
Solution 2:
financial advantage (disadvantage) per box of Chap-Off if Silven buys its tubes from the outside supplier = $1.22 - $1.35 = ($0.13)
Solution 3:
Financial advantage (disadvantage) in total (not per box) if Silven buys 155,000 boxes of tubes from the outside supplier = -$0.13 * 155000 = ($20,150)
Solution 4:
As there is net financial disadvantage of $20,150, therefore silven should make the tubes.
Solution 5:
Maximum price that silven willing to pay outside supplier = Variable cost to make = $1.22 per box
Solution 6:
Cost to make 191000 boxes = (191000*$1.22) + $56,000 = $289,020
Cost to buy 191000 boxes = 191000*$1.35 = $257,850
Financial advantage (Disadvantage) of buying = $289,020 - $257,850 = $31,170
As there is financial advantage, therefore silven should buy the boxes.
Solution 7:
If outside supplier can accept any quantity of order, then silven should make 155000 boxes and buy 36000 boxes from outside supplier.
Problem 12-23 Make or Buy Decision [LO12-3] Silven Industries, which manufactures and sells a highly successful...
Problem 12-23 Make or Buy Decision [LO12-3] 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...
Problem 12-23 Make or Buy Decision (LO12-3] 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...
3 Problem 12-23 Make or Buy Decision (L012-3) 12 points eBook 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...
PROBLEM 12-23 Make or Buy Decision LO12 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 -3 After considerable research, a winter products line has been developed. However, Silven's president has decided to introduce only one of the new...
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...
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...
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...
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...
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...
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...