(Please show your work and organize/structure your responses appropriately in Excel)Coronation makes a line of antiseptic and conditioning cream for the medical community. Thecompany stakeholders decided to develop a retail line. However, because of their conservativenature, the CEO will introduce only one of the new products for this year. If successful, they willexpand in future years.They selected to sell the conditioning cream in a tube. The company will sell the product towholesalers in boxes of 24 tubes for $16.00 per box. Since there's available capacity, thecompany will not incur additional fixed charges to produce the product. However, to allocate afair share of the company's current fixed costs to the new product, the product will absorb a$135,000 fixed charge.Using estimated sales and production of 100,000 boxes of conditioning cream as the standardvolume, the accounting department developed the following costs per box of 24 tubes:Direct labourDirect materialsTotal overhead$4.15$5.85$2.85Coronation approached a plastics manufacturer to discuss the possibility of purchasing thetubes from them for the new product. The purchase price of the empty tubes from themanufacturer would be $1.90 per 24 tubes. If Coronation accepts the proposal, it is estimatedthat direct labour and variable overhead costs would be reduced by 10% and direct materialscosts would be reduced by 20%.Required:A) Should Coronation make or buy the tubes? If they should buy then what is themaximum acceptable purchase price?B) Instead of sales of 100,000 boxes, revised estimates show sales of 128,500boxes. This new volume requires the company to rent additional equipment foran annual rate of $10,600 to manufacture the tubes. This is the only additionalfixed cost even if sales increase to 300,000 boxes (300,000 production levelgoal for the third year). With this, should Coronation make or buy the tubes?C) The company has the option of making and buying at the same time. Whatwould be your answer to part (c) if this alternative is considered?D) What strategic consideration would you recommend to Coronation based onthese calculations?

a) Variable Cost (VC): The cost which Is directly associated with per unit of goods Produced is…

A) Should Coronation make or buy the tubes? If they should buy then w maximum acceptable purchase price? B) Instead of sales of 100,000 boxes, revised estimates show sales of 1: boxes. This new volume requires the company to rent additional equ an annual rate of $10,600 to manufacture the tubes. This is the only a fixed cost even if sales increase to 300,000 boxes (300,000 productio goal for the third year). With this, should Coronation make or buy the C) The company has the option of making and buying at the same time. would be your answer to part (c) if this alternative is considered?

A) Should Coronation make or buy the tubes? If they should buy then w maximum acceptable purchase price? B) Instead of sales of 100,000 boxes, revised estimates show sales of 1: boxes. This new volume requires the company to rent additional equ an annual rate of $10,600 to manufacture the tubes. This is the only a fixed cost even if sales increase to 300,000 boxes (300,000 productio goal for the third year). With this, should Coronation make or buy the C) The company has the option of making and buying at the same time. would be your answer to part (c) if this alternative is considered?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 14P

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