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Unformatted text preview: Smeal College of Business Accounting for Decision Making: ACCTG 211 Pennsylvania State University Professor Huddart Vernom Corporation The Vernom Corporation, which produces and sells to wholesalers a highly successful line of summer lotions and insect repellents, has decided to diversify 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. 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 available capacity, no additional fixed charges will be incurred to produce the product. A $100,000 charge will be absorbed by the product, however, to allocate a fair share of the company’s present fixed costs to the new product. Using the estimated sales and production of 100,000 boxes of Chap- Off as the expected volume, the accounting department has developed the...
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