htSilven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided todiversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotionsand 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 onlyone 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 inboxes of 24 tubes for $10 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred toproduce the product. However, a $115,500 charge for fixed manufacturing overhead will be absorbed by the product under thecompany's absorption costing system.McGrawHillUsing the estimated sales and production of 165,000 boxes of Chap-Off, the Accounting Department has developed the followingmanufacturing cost per box:Direct materialDirect laborAManufacturing overheadTotal costThe 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 tubeswould be $2.00 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its directlabor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would bereduced by 30%.تمRequired: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 $2.10 per box that is shown above into its variable and fixed components toderive 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 165,000 boxes of tubes from the outside supplier?4. Should Silven Industries make or buy the tubes?Z5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes?6. Instead of sales of 165,000 boxes of tubes, revised estimates show a sales volume of 203,000 boxes of tubes. At this higher salesvolume, Silven would need to rent extra equipment at a cost of $70,000 per year to make the additional 38,000 boxes of tubes.Assuming that the outside supplier will not accept an order for less than 203,000 boxes of tubes, what is the financial advantageL:L.: 111-11.L ::.-....200.000 4-...LFFL-- 1L..11:_- :..__:_2WSF2#3X$ 4.703.002.10$9.80H80F3ED$4COOO000F4RFLO%5V< PrevF5T6G6 of 6MacBook ProF6YB&7HTLL:L.F7NextUN8DIIF89DDF9KMO0<7F10LमPF11> htSilven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided todiversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotionsand 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 onlyone 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 inboxes of 24 tubes for $10 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred toproduce the product. However, a $115,500 charge for fixed manufacturing overhead will be absorbed by the product under thecompany's absorption costing system.McGrawHillUsing the estimated sales and production of 165,000 boxes of Chap-Off, the Accounting Department has developed the followingmanufacturing cost per box:Direct materialDirect laborAManufacturing overheadTotal costThe 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 tubeswould be $2.00 per box of 24 tubes. If Silven Industries stops making the tubes and buys them from the outside supplier, its directlabor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and its direct materials costs would bereduced by 30%.تمRequired: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 $2.10 per box that is shown above into its variable and fixed components toderive 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 165,000 boxes of tubes from the outside supplier?4. Should Silven Industries make or buy the tubes?Z5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes?6. Instead of sales of 165,000 boxes of tubes, revised estimates show a sales volume of 203,000 boxes of tubes. At this higher salesvolume, Silven would need to rent extra equipment at a cost of $70,000 per year to make the additional 38,000 boxes of tubes.Assuming that the outside supplier will not accept an order for less than 203,000 boxes of tubes, what is the financial advantageL:L.: 111-11.L ::.-....200.000 4-...LFFL-- 1L..11:_- :..__:_2WSF2#3X$ 4.703.002.10$9.80H80F3ED$4COOO000F4RFLO%5V< PrevF5T6G6 of 6MacBook ProF6YB&7HTLL:L.F7NextUN8DIIF89DDF9KMO0<7F10LमPF11>

Decision making of purchase from outside supplier or manufacture inhouse is one of the most…

Answered: Silven Industries, which manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 $9 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $105,000 charge for fixed manufacturing overhead will be absorbed by the product under the company's absorption costing system.…
The demand for cocoa butter hand lotion, one of numerous products manufactured by Smooth Skin Care Products Inc., has dropped sharply because of recent competition from a similar product. The controller has been asked by the president of the company for advice on whether to continue production during the following month or to suspend the manufacture of cocoa butter hand lotion until a strategy to regain market share. The controller has assembled the following pertinent data: Smooth Skin Care Products Inc. Income Statement - Cocoa Butter Hand Lotion For the Month Ended January 31 Financial Categories Sales (400,000) Cost of goods sold Gross profit Dollar Amount $ 32,200,000 $28,330,000 $ 3,870,000 Selling and admin expenses Loss from operations $ 4,270,000 $ (400,000) The production costs and selling and administrative expenses, based on the production of 400,000 units in the Income Statement above, are as follows: Direct materials Category Dollar Amount $16 per unit 17 per unit Direct…
Greenview Dairies produces a line of organic yogurts for sale at supermarkets and specialty markets in the Southeast. Economic conditions and changing tastes have resulted in slowing demand growth. After recently expanding capacity, the company is now operating at 65 percent of the new capacity. The company is considering dropping one of the yogurt flavors, mixed berry, in hopes of improving profitability. If the mixed berry variety is dropped, the revenue associated with it will be lost and the related variable costs saved. The production manager estimates that the fixed costs will also be reduced by 30 percent. The following quarterly product line income statements (in thousands of dollars) are available: Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Vanilla $21,790 14,700 $7,090 3,095 $3,995 Peach $33,840 26,465 $7,375 4,655 $2,720 Mixed Berry $28,380 25,490 Complete this question by entering your answers in the…
The Cheyenne Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like to increase its market share in the Sunbelt. In order to do so, Cheyenne has decided to locate a new factory in the Panama City area. Cheyenne will either buy or lease a site depending upon which is more advantageous. The site location committee has narrowed down the available sites to the following three very similar buildings that will meet their needs. Building A: Purchase for a cash price of $615,000, useful life 28 years. Building B: Lease for 28 years with annual lease payments of $71,570 being made at the beginning of the year. Building C: Purchase for $659,900 cash. This building is larger than needed; however, the excess space can be sublet for 28 years at a net annual rental of $6,870. Rental payments will be received at the end of each year. The Cheyenne Inc. has no aversion to being a landlord. Show Transcribed Text In which building would you recommend that The Cheyenne Inc.…
Sandhill International Inc. is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company's current offerings, but offer a complementary fit to its existing product line. Frank Peralta, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Carol Herbert, the company's CFO, has provided the following projections based on results with and without the new products. Without New Products With New Products Sales $9,725,000 $16,808,500 Net income 605,600 1,254,800 Average total assets 5,457,000 13,863,000 (a) Calculate the company's return on assets, profit margin, and asset turnover, both with and without the new product line. (Round answers to 1 decimal place, e.g. 15.2% or 15.2.) Without New Products With New Products Return on assets % Profit…
Finisterra, S.A. Finisterra, S.A., located in the state of Baja California, Mexico, manufactures frozen Mexican food which enjoys a large following in the U.S. states of California and Arizona to the north. In order to be closer to its U.S. market, Finisterra is considering moving some of its manufacturing operations to southern California. Operations in California would begin in year 1 for three years and have the following attributes: E The operations in California will pay 81% of its accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossed up dividends from foreign countries, with a credit for host-country taxes already paid. The corporate income tax rate in U.S. is 28% (the tax rate in Mexico is lower than the rate in the U.S.), the current spot exchange rate is Ps10.00/$, and the exchange rates for the next three years will be Ps11.00/S, Ps12.00/S, and Ps13.00/S, respectively. Assume the after-tax dividends received by the parent in years…
Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous jobs. The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows: Revenue $201,000 Less: Design supplies (variable cost) $17,000 Salary of Samantha Spade (owner) 80,000 Salary of Kim Bridesdale (full time employee) 55,000 Rent 18,000 Utilities 6,000 Depreciation of office equipment 3,600 Printing of…
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 $11 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $99,000 charge for fixed manufacturing overhead will be absorbed by the product under the company’s absorption costing…
Assume that a general economic downturn occurred during year 2, with product demand falling from 6,000 to 5,000 units. Determine the percentage decrease in company net income if Consolidated had adopted Plan A.
. Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013. Refresh Resorts has previously evaluated divisions based on RI, but the company is considering changing to an EVA approach. All spas are assumed to face similar risks. Data for 2017 are: Q.Refer back to the original data. Calculate the WACC for Refresh Resorts.
SKE Corporation manufactures large kitchen appliances. The following represents financial information for two years: Mr. Cheung is also reviewing the quality of various production process. Recently several competitors have introduced similar prototype chips with much higher quality and causing SKE's sales to decline. Mr. Cheung has embarked an intensive campaign to strengthen its quality control at the beginning of 2023. The costs relating to quality control were complied for 2021 and the full year of 2022. The related costs are shown below 2021 2022 Process Inspection 60,000 52,800 Scrap 60,200 57,600 Quality Training 440,000 610,000 Warranty repairs 150,000 140,000 Testing equipment 230,000 230,000 Resolving customer complaints 108,400 89,000 Rework 390,000 544,000 Preventive maintenance 304,000 440,000 Material Inspection 150,000 210,000 Field Testing 400,000 300,000 Total costs $2,292,600 $2,673,400 Required: a. Prepare a cost of quality (COQ) report for 2021 and 2022, calculate…

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