2. lCompute the contrib uon margin per unit for [assume direct labor is a feted cost]: {Do not round intermediate calculations. Round your answers to 2 decimal places} 9 Answer is complete but not entirelyr correct. I Purchased wvo dnJms a 211921 9 Manufactured WMD Manufactured bike Ice 2 22W 3. As seen as your analysis was shown to the top management team at TufShJif, several managers got into an argument conceming 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 TufStuif. After all. \"direct\" means you can directly trace the cost to products. "If direct labor is not a variable cost, what is?\" Another manager argued just as strenuously that direct labor should be considered a xed cost at TufStu. No one had been laid o in over a decade, and for all practical purposes, everyone at the plant is on a monthly salary. Everyone classied as direct labor works a regular rillhour 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 bike ira mes would require. a. iCompute the contribution margin per welding hour for [assume direct labor is a xed cost]: [Round your nal answers to 2 decimal places.] 0 Answer is complete and correct. Ma nufactured WU per dmms '3 151350 hour Manufactured bike per frames $ 251.00 a hour b. Determine the number of WED drums {if any} that should be purchased and the number of WD drums andlor bike frames [if any} that should be manufactured. [Assume direct labor is a fixed cost] 0 Answer is complete but not entirely correct. 2222222 22229 , c. What is the increase in net operating income that Iwould result from this plan oyer current operations? [Do not round intermediate calculations] 0 Answer is complete but not entirely correct. $2.1232199 4. Redo requirements [2] and [3} making the opposite assumption about direct labor from the one you originallyr made. In other words, if you treated direct labor as a variable cost, redo the analysis treating it as a xed cost. If you treated direct labor as a xed cost, redo the analysis treating it as a 1.rariable cost. a. Compute the contribution margin per unit for [assume direct labor is a variable cost]: [Do not round intermediate calculations. Round your answers to 2 decimal places.) 0 Answer is complete and correct. Purchased 1|.I'|u|"'u|'|]| dmms Manufactured WVD dnJ ms Manufactured bike frames b. Compute the contribution margin per welding hourfor [assume direct labor is a variable cost]: [Round your nal answers to 2 decimal places.} 0 Answer is complete and correct. Manufactured \"MB per dmms ll 145'\" a hour Manufactured bike per frames 3 138500 hour c. Determine the number of \"ND drums [ifanyjll that should be purchased and the number of 'Il'WD dmms andtor bike frames [if any} that should be manufactured. [Assume direct labor is a variable cost] 0 Answer is complete and correct. c. Determine the number of WIND! drums (ifanyr) that should be purchased and the number of WED dnJms andior bike frames {if any} that should be manufactured. [Assume direct labor is a variable cost] 0 Answer is complete and correct. 1lwo dnJms son 0 , d. What is the increase in net operating income that Iwould result from this plan over current operations? [Do not round intermediate calculations.) 9 Answer is complete but not entirelwr correct. 55 53,133 0 TufStuff, lnc., 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 heavyduty corrosionresistant metal drum, called the WD dnJm, 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 2,455 hours of welding time is available annually oI the machine. Because each drum requires 5.5 hours of welding machine tim e. annual production is limited to 3,555 drums. At present, the welding machine is used exclusively to make the WW drums. The accounting department has provided the following nancial data conceming the WD drums: W'iiD DnJms Selling price per dnJm 5 1?5.55 l[lost per drum: Direct materials $45.55 Direct labor {$15 per hour} 4.55 Manufacturing overhead 5.25 Selling and administrative expense 1?.55 T155 Margin per dnim 5 55.15 Management believes 3,555 1lI'll'luiD drums could be sold each year if the company had sufcient manufacturing capacity. As an altemative to adding another welding machine. management has considerec buying additional drums from an outside supplier. Harcor Industlies, Inc. a supplier of quality products, would be able to provide up to 1,555 WEDtype dni ms per year at a price of 5135 per dmm, which TufStuff would resell to its customers at its normal selling price after appropriate relabeling. Megan Flores. TufStust production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 5.2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 3,555 bike frames per year to bike manufacturers at a once of STE each. The accounting department has provide the following data concerning the proposed new product Bite Frames Selling price per frame 5 T555 l[lost per frame: Direct materials 51555 Direct labor {$15 per hour} 22.55 Manufacturing overhead 1?.55 Selling and administrative expense 5.55 55.55 Margin per frame 5 5.45 The bike frames could be produced with existing equipment and personnel. Manufacturing overhead is allocated to products on the basis of direct laborhours. Most of the manufacturing overhead consists of xed common costs such as rent on the factory building, but some of it is variable. The van'able manufacturing overhead has been estimated at $1.25 per iii-FUD drum and $2.?5 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 xed common costs, but it has been estimated that valiable selling and administrative expenses amount to $1.55 per WED drum whether made or purchased and would be $2.55 per bike frame. All of the company's employeesdirect and indirectare paid for full 45hour workweeks and the company has a policy of laying off workers only in major recessions. Required: '1. Would you be corrrfortable relying on the nancial data provided by the accounting department for making decisions related to the DMD drums and bike frames? lig't'es Ohio