1. value 10.00 points TutStuff Inc, sells a wide range of drums, bins, boxes and other containers that are used in the chemical industry. One of the company's products is a heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes Production is constrained by the capacity of an automated welding machine that is used to make precision welds. A total of 2,400 hours of welding time is available annually on the machine. Because each drum requires 0.8 hours of welding machine time, annual production is limited to 3,000 drums. At present, the welding machine is used exclusively to make the WVD drums. The accounting department has provided the following financial data concerning the WVD drums WVD Drums Selling price per drum $ 159.00 Cost per drum Direct materials $44.90 Direct labor ($18 per hour) 4.50 Manufacturing overhead 3.55 Selling and administrative expense 15 80 68 75 Margin per drum $ 90.25 Management believes 3,500 WVD drums could be sold each year if the company had sufficient manufacturing capacity. As an alternative to adding another welding machine, management has considered buying additional drums from an outside supplier Harcor Industries, Inc., a supplier of quality products, would be able to provide up to 1,600 WVD-type drums per year at a price of $120 per drum, which TufStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, TufStuff's production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 0 2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 3,300 bike frames per year to bike manufacturers at a price of $69 each. The accounting department has provided the following data concerning the proposed new product Bike Frames Salina na ma ROA Management believes 3,500 WVD drums could be sold each year if the company had sufficient manufacturing capacity. As an alternative to adding another welding machine, management has considered buying additional drums from an outside supplier. Harcor Industries, Inc., a supplier of quality products would be able to provide up to 1600 WVD type drums per year at a price of S120 per drum, which TutStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, TutStuff's production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 0 2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TulStuff could sell up to 3,300 bike frames per year to bike manufacturers at a price of $69 each The accounting department has provided the following data concerning the proposed new product: Bike Frames Selling price per frame $ 69.00 Cost per frame Direct materials $17.90 Direct labor (S18 per hour) 22.50 Manufacturing overhead 16.15 Selling and administrative expense 6.90 63 45 Margin per frame S 5.55 The bike frames could be produced with existing equipment and personnel Manufacturing overhead is allocated to products on the basis of direct labor-hours. Most of the manufacturing overhead consists of fixed common costs such as rent on the factory building, but some of it is vanable. The variable manufacturing overhead has been estimated at $1.09 per WVD drum and $100 per bike frame The variable manufacturing overhead cost would not be incurred on drums acquired from the outside supplier Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $0 89 per WVD drum whether made or purchased and would be $ 80 per bike frame All of the company's employees - direct and indirect--are paid for full 40-hour workweeks and the company has a policy of laying off workers only in major recessions Required: 1. Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVD drums and bike frames? bo WOU A Pobo Cup X wot Application Problem Chaptx somheducation.com/http-0.09702824516860337_1615460853860 The mes could be produced with existing equipment and personnel Manufacturing overhead is located to products on the basis of direct labor-hours. Most of the manufacturing overhead consists of od common costs such as rent on the factory building, but some of it is variable. The variable manachung overhead has been estimated at $100 per WVD drum and $1.00 per bike frame The Vabimanuacturing overhead cost would not be incurred on drums acquired from the outside supplier Selling and administrative expenses are allocated to products on the basis of revenues Almost all of the seling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to 50 89 per WD drum whether made or purchased and would be 50 per bike frame All of the company's employers direct and indirect are paid for full 40 hour workweeks and the company has a policy of taying off workers only in major recessions Required: 1 Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVD drums and bike frames? Yes No 2. Compute the contribution margin per unit for assume direct labor is a fixed cost) (Do not round intermediate calculations. Round your answers to 2 decimal places) a Purchased WD drums Manufactured WVD drums Manufactured bike frames Contribution Margin per unit per unit per unit 3. As soon as your analysis was shown to the top management team at TufStuff several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TutStuff After all, "direct means you can directly trace the cost to products. "If direct fabor is not a variable cost what is? Another manager argued just as strenuously that direct labor should be considered a fixed cost at TutStuff No one had been laid off in over a decade, and for all practical purposes, everyone at the plant is on a monthly salary Everyone classified as direct labor works a regular 40 hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the welding machine is used to make drums or frames, the total payroll would be exactly the same. There is enough slack in the form of idle time to accommodate any increase in total direct labor time that the intrames eztomheducation.com/h.pk? 0.09702824516880337_1635468853860 Purchased WD drums Manufactured WVO drums c Manufactured bike frames Contribution Margin por un por un per unit 3 As soon as your analysis was shown to the top management team at Tulstuff several managers got into an argument concerning how direct labor costs should be treated when making this decision One manager good that direct laboris always treated as a variable cost in textbooks and in practice and has always been considered a variable costat Tulstur After all, direct means you can directly trace the cost to products 'if direct laboris not a variable cost what is?" Another manager argued just as strenuously that direct Intior should be considered a fixed cost at TutStuft No one had been laid off in over a decade, and for all practical purposes, everyone at the plant is on a monthly salary. Everyone classified as direct labor works a regular 40 hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the welding machine is used to make drums or frames, the total payroll would be exactly the same. There is enough stack in the form of idio time to accommodate any increase in total direct labor time that the bike frames would require a Compute the contribution margin per welding hour for assume direct laboris a fixed cost): (Round your final answers to 2 decimal places.) Manufactured WVD drums Manufactured bike frames Contribution Margin per hour per hour b Determine the number of WVD drums of any) that should be purchased and the number of WVD drums andfor bike frames (if any) that should be manufactured (Assume direct labor is a fixed cost] Purchased Manufactured WVD drums What is the increase in net operating income that would result from this plan over current operations? (Do not round Intermediate calculations.) Increase in net operating income 4 Redo requirements (2) and (3) making the opposite assumption about direct labor from the one you originally made. In other words, if you treated direct labor as a variable cost redo the analysis treating it as a fixed cost if you treated direct labor as a fuced cost, redo the analysis treating it as a variable cost a Compute the contribution margin per unit for fassume direct labor is a variable cost). (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Purchased WVD drums Manufactured WVO drums Manufactured bike frames Contribution Margin por unit per unit per unit b. Compute the contribution margin per welding hour for (assume direct labor is a variable cost), (Round your final answers to 2 decimal places.) drums or frames, the total payroll would be ex: time to accommodate any increase in total direct labor time that the bike frames w a Compute the contribution margin per welding hour for (assume direct labor is a fixed cost] (Round your final answers to 2 decimal places.) Manufactured WVD drums Manufactured bike frames Contribution Margin per hour per hour b. Determine the number of WVD drums (if any) that should be purchased and the number of WVD drums and/or bike frames (if any) that should be manufactured (Assume direct labor is a fixed cost Purchased Manufactured WD drums Bike frames c. What is the increase in net operating income that would result from this plan over current operations? (Do not round intermediate calculations.) Increase in net operating income CANG WOT Anabon Problem Chap stomheducation.com.px?_009702824516880337_1635468853860 Compute the contribution margin per unit for fassume direct laboris a variable costs (Do not round Intermediate calculations. Round your answers to 2 decimal places) Purchased WVD drums Manufactured WVO drums Manufactured bormes Contribution Margin perunt per unit por unit Compute the contribution margin per welding hour for assume direct labores a vanable cost) (Round your final answers to 2 decimal places) Manufactured WVD drums Manufactured bike fries Contribution Margin per hour per hour Determine the number of WVD drums (if any) that should be purchased and the number of WVD drums andior bike frames of any that should be manufactured (Assume direct labor is a variable cost Purchased Manufactured WVD drums Bike frames 1. value 10.00 points TutStuff Inc, sells a wide range of drums, bins, boxes and other containers that are used in the chemical industry. One of the company's products is a heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes Production is constrained by the capacity of an automated welding machine that is used to make precision welds. A total of 2,400 hours of welding time is available annually on the machine. Because each drum requires 0.8 hours of welding machine time, annual production is limited to 3,000 drums. At present, the welding machine is used exclusively to make the WVD drums. The accounting department has provided the following financial data concerning the WVD drums WVD Drums Selling price per drum $ 159.00 Cost per drum Direct materials $44.90 Direct labor ($18 per hour) 4.50 Manufacturing overhead 3.55 Selling and administrative expense 15 80 68 75 Margin per drum $ 90.25 Management believes 3,500 WVD drums could be sold each year if the company had sufficient manufacturing capacity. As an alternative to adding another welding machine, management has considered buying additional drums from an outside supplier Harcor Industries, Inc., a supplier of quality products, would be able to provide up to 1,600 WVD-type drums per year at a price of $120 per drum, which TufStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, TufStuff's production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 0 2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 3,300 bike frames per year to bike manufacturers at a price of $69 each. The accounting department has provided the following data concerning the proposed new product Bike Frames Salina na ma ROA Management believes 3,500 WVD drums could be sold each year if the company had sufficient manufacturing capacity. As an alternative to adding another welding machine, management has considered buying additional drums from an outside supplier. Harcor Industries, Inc., a supplier of quality products would be able to provide up to 1600 WVD type drums per year at a price of S120 per drum, which TutStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, TutStuff's production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 0 2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TulStuff could sell up to 3,300 bike frames per year to bike manufacturers at a price of $69 each The accounting department has provided the following data concerning the proposed new product: Bike Frames Selling price per frame $ 69.00 Cost per frame Direct materials $17.90 Direct labor (S18 per hour) 22.50 Manufacturing overhead 16.15 Selling and administrative expense 6.90 63 45 Margin per frame S 5.55 The bike frames could be produced with existing equipment and personnel Manufacturing overhead is allocated to products on the basis of direct labor-hours. Most of the manufacturing overhead consists of fixed common costs such as rent on the factory building, but some of it is vanable. The variable manufacturing overhead has been estimated at $1.09 per WVD drum and $100 per bike frame The variable manufacturing overhead cost would not be incurred on drums acquired from the outside supplier Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $0 89 per WVD drum whether made or purchased and would be $ 80 per bike frame All of the company's employees - direct and indirect--are paid for full 40-hour workweeks and the company has a policy of laying off workers only in major recessions Required: 1. Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVD drums and bike frames? bo WOU A Pobo Cup X wot Application Problem Chaptx somheducation.com/http-0.09702824516860337_1615460853860 The mes could be produced with existing equipment and personnel Manufacturing overhead is located to products on the basis of direct labor-hours. Most of the manufacturing overhead consists of od common costs such as rent on the factory building, but some of it is variable. The variable manachung overhead has been estimated at $100 per WVD drum and $1.00 per bike frame The Vabimanuacturing overhead cost would not be incurred on drums acquired from the outside supplier Selling and administrative expenses are allocated to products on the basis of revenues Almost all of the seling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to 50 89 per WD drum whether made or purchased and would be 50 per bike frame All of the company's employers direct and indirect are paid for full 40 hour workweeks and the company has a policy of taying off workers only in major recessions Required: 1 Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVD drums and bike frames? Yes No 2. Compute the contribution margin per unit for assume direct labor is a fixed cost) (Do not round intermediate calculations. Round your answers to 2 decimal places) a Purchased WD drums Manufactured WVD drums Manufactured bike frames Contribution Margin per unit per unit per unit 3. As soon as your analysis was shown to the top management team at TufStuff several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TutStuff After all, "direct means you can directly trace the cost to products. "If direct fabor is not a variable cost what is? Another manager argued just as strenuously that direct labor should be considered a fixed cost at TutStuff No one had been laid off in over a decade, and for all practical purposes, everyone at the plant is on a monthly salary Everyone classified as direct labor works a regular 40 hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the welding machine is used to make drums or frames, the total payroll would be exactly the same. There is enough slack in the form of idle time to accommodate any increase in total direct labor time that the intrames eztomheducation.com/h.pk? 0.09702824516880337_1635468853860 Purchased WD drums Manufactured WVO drums c Manufactured bike frames Contribution Margin por un por un per unit 3 As soon as your analysis was shown to the top management team at Tulstuff several managers got into an argument concerning how direct labor costs should be treated when making this decision One manager good that direct laboris always treated as a variable cost in textbooks and in practice and has always been considered a variable costat Tulstur After all, direct means you can directly trace the cost to products 'if direct laboris not a variable cost what is?" Another manager argued just as strenuously that direct Intior should be considered a fixed cost at TutStuft No one had been laid off in over a decade, and for all practical purposes, everyone at the plant is on a monthly salary. Everyone classified as direct labor works a regular 40 hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the welding machine is used to make drums or frames, the total payroll would be exactly the same. There is enough stack in the form of idio time to accommodate any increase in total direct labor time that the bike frames would require a Compute the contribution margin per welding hour for assume direct laboris a fixed cost): (Round your final answers to 2 decimal places.) Manufactured WVD drums Manufactured bike frames Contribution Margin per hour per hour b Determine the number of WVD drums of any) that should be purchased and the number of WVD drums andfor bike frames (if any) that should be manufactured (Assume direct labor is a fixed cost] Purchased Manufactured WVD drums What is the increase in net operating income that would result from this plan over current operations? (Do not round Intermediate calculations.) Increase in net operating income 4 Redo requirements (2) and (3) making the opposite assumption about direct labor from the one you originally made. In other words, if you treated direct labor as a variable cost redo the analysis treating it as a fixed cost if you treated direct labor as a fuced cost, redo the analysis treating it as a variable cost a Compute the contribution margin per unit for fassume direct labor is a variable cost). (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Purchased WVD drums Manufactured WVO drums Manufactured bike frames Contribution Margin por unit per unit per unit b. Compute the contribution margin per welding hour for (assume direct labor is a variable cost), (Round your final answers to 2 decimal places.) drums or frames, the total payroll would be ex: time to accommodate any increase in total direct labor time that the bike frames w a Compute the contribution margin per welding hour for (assume direct labor is a fixed cost] (Round your final answers to 2 decimal places.) Manufactured WVD drums Manufactured bike frames Contribution Margin per hour per hour b. Determine the number of WVD drums (if any) that should be purchased and the number of WVD drums and/or bike frames (if any) that should be manufactured (Assume direct labor is a fixed cost Purchased Manufactured WD drums Bike frames c. What is the increase in net operating income that would result from this plan over current operations? (Do not round intermediate calculations.) Increase in net operating income CANG WOT Anabon Problem Chap stomheducation.com.px?_009702824516880337_1635468853860 Compute the contribution margin per unit for fassume direct laboris a variable costs (Do not round Intermediate calculations. Round your answers to 2 decimal places) Purchased WVD drums Manufactured WVO drums Manufactured bormes Contribution Margin perunt per unit por unit Compute the contribution margin per welding hour for assume direct labores a vanable cost) (Round your final answers to 2 decimal places) Manufactured WVD drums Manufactured bike fries Contribution Margin per hour per hour Determine the number of WVD drums (if any) that should be purchased and the number of WVD drums andior bike frames of any that should be manufactured (Assume direct labor is a variable cost Purchased Manufactured WVD drums Bike frames