Wildhorse Packaging Company is a leading manufacturer of cardboard boxes and other product packaging solutions. One of the company’s major product lines is custom-printed cake boxes that are sold to some of the country’s best known bakeries at a price of $0.50 per box. To maintain its high-quality image, Wildhorse uses a thick premium coated paper for all of its cake boxes. Based on annual production of 1,000,000 boxes, Wildhorse’s cost for producing a box is as follows:

Paper $0.12
Ink 0.03
Direct labor 0.05
Variable overhead 0.07
Fixed overhead 0.10
Total cost per box $0.37