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Building Your Skills Analytical Thinking (L011-1, LO11-3, LO11-5) TufStuff, 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 2,300 hours of welding time is available annually on the machine. Because each drum requires 0.4 hours of welding machine time, annual production is limited to 5,375 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: $209.00 WVD Drums Selling price per drum Cost per drum: Direct materials Direct labor ($33 per hour) Manufacturing overhead Selling and administrative expense Margin per drum $52.10 6.60 13.50 32.80 105.00 $104.00 Management believes 7,275 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 4,375 WVD-type drums per year at a price of $183 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 the company could make better use of the welding machine by manufacturing bike frames, which would require only 0.5 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 1,900 bike frames per year to bike manufacturers at a price of $314 each. The accounting department has provided the following data concerning the proposed new product: $314.00 Bike Frames Selling price per frame Cost per frame: Direct materials Direct labor ($18 per hour) Manufacturing overhead Selling and administrative expense Margin per frame $108.40 52.80 51.00 59.80 272.00 $ 42.00 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 variable. The variable manufacturing overhead has been estimated at $1.35 per WVD drum and $1.90 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 $0.75 per WVD drum whether made or purchased and would be $2.80 per bike frame. All of the company's employees-direct and indirect--are paid for full 40.00-hour work weeks and the company has a policy of laying off workers only in major recessions. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Req2 Reg 3 Reg 4 Reg 4B Req 5 Reg 6 Reg 7A Req 7B 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 WVD drums 3,900 3,375 Bike frames 1,900 1,900 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Req 4B Reqs Reg 6 Req ZA Reg 78 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 variable cost] Purchased Manufactured WVD drums 5,750 1,525 Bike frames 5,750 1,525 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 4A Req 4B Reqs Reg 6 Reg 7A Req7B What is the increase (decrease) in net operating income that would result from this plan over current operations? [Assume direct labor is a variable cost] (Do not round intermediate calculations.) Increase (decrease) in net operating income $ 94,081 Req 7A Req1 Req2 Reg 3 Reg 4 Req 48 Reg 5 Reg 6 Req 7A Reg 7B Compute the contribution margin per unit for (assume direct labor is a fixed cost] (Round your intermediate calculations and final answers to 2 decimal places.) a. Purchased WVD drums b. Manufactured WVD drums c. Manufactured bike frames Contribution Margin $ 25.25 per unit $ 154,80 per unit $ 200.90 per unit Req1 Reg 2 Reg 3 Req 4A Req 4B Reg 5 Req 6 Req 7A Req 7B Assuming direct labor is a fixed cost, compute the contribution margin per welding hour for (Round your intermediate calculations and final answers to 2 decimal places.) Contribution Margin 1. Manufactured WVD drums 387.00 per hour 2. Manufactured bike frames $ 401,80 per hour BG PAGAM Req1 Reg 2 Reg 3 Req 4A Req 4B Reg 5 Reg 6 Req 7A Reg 78 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 WVD drums 3.900 3,375 Bike frames 1,900 1,900 PARS Req 1 Reg 2 Reg 3 Req 4A Req 4B Req5 Reg 6 Req 7A Req 7B What is the increase (decrease) in net operating income that would result from this plan over current operations? [Assume direct labor is a fixed cost] (Round your intermediate calculations to 2 decimal places and Round final answer to the nearest whole dollar value.) Increase (decrone) in net operating income $ 170,685 Req 1 Reg 2 Reg 3 Req 4A Req 4B Req 5 Req 6 Req 7A Req 7B 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.) Contribution Margin Purchased WVD drums $ 25.25 per unit Manufactured WVD drums $ 148.20 per unit Manufactured bike frames 148.10 per unit $ Reg 2 Req3 Req 4A Reg 4B Reg 1 Req 5 Reg 6 Req ZA Req 7B Assuming direct labor is a variable cost, compute the contribution margin per welding hour for (Round your intermediate calculations and final answers to 2 decimal places.) Contribution Margin Manufactured WVD drums $ 370,50 per hour Manufactured bike frames 296.20 per hour Building Your Skills Analytical Thinking (L011-1, LO11-3, LO11-5) TufStuff, 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 2,300 hours of welding time is available annually on the machine. Because each drum requires 0.4 hours of welding machine time, annual production is limited to 5,375 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: $209.00 WVD Drums Selling price per drum Cost per drum: Direct materials Direct labor ($33 per hour) Manufacturing overhead Selling and administrative expense Margin per drum $52.10 6.60 13.50 32.80 105.00 $104.00 Management believes 7,275 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 4,375 WVD-type drums per year at a price of $183 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 the company could make better use of the welding machine by manufacturing bike frames, which would require only 0.5 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 1,900 bike frames per year to bike manufacturers at a price of $314 each. The accounting department has provided the following data concerning the proposed new product: $314.00 Bike Frames Selling price per frame Cost per frame: Direct materials Direct labor ($18 per hour) Manufacturing overhead Selling and administrative expense Margin per frame $108.40 52.80 51.00 59.80 272.00 $ 42.00 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 variable. The variable manufacturing overhead has been estimated at $1.35 per WVD drum and $1.90 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 $0.75 per WVD drum whether made or purchased and would be $2.80 per bike frame. All of the company's employees-direct and indirect--are paid for full 40.00-hour work weeks and the company has a policy of laying off workers only in major recessions. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Req2 Reg 3 Reg 4 Reg 4B Req 5 Reg 6 Reg 7A Req 7B 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 WVD drums 3,900 3,375 Bike frames 1,900 1,900 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Req 4B Reqs Reg 6 Req ZA Reg 78 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 variable cost] Purchased Manufactured WVD drums 5,750 1,525 Bike frames 5,750 1,525 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 4A Req 4B Reqs Reg 6 Reg 7A Req7B What is the increase (decrease) in net operating income that would result from this plan over current operations? [Assume direct labor is a variable cost] (Do not round intermediate calculations.) Increase (decrease) in net operating income $ 94,081 Req 7A Req1 Req2 Reg 3 Reg 4 Req 48 Reg 5 Reg 6 Req 7A Reg 7B Compute the contribution margin per unit for (assume direct labor is a fixed cost] (Round your intermediate calculations and final answers to 2 decimal places.) a. Purchased WVD drums b. Manufactured WVD drums c. Manufactured bike frames Contribution Margin $ 25.25 per unit $ 154,80 per unit $ 200.90 per unit Req1 Reg 2 Reg 3 Req 4A Req 4B Reg 5 Req 6 Req 7A Req 7B Assuming direct labor is a fixed cost, compute the contribution margin per welding hour for (Round your intermediate calculations and final answers to 2 decimal places.) Contribution Margin 1. Manufactured WVD drums 387.00 per hour 2. Manufactured bike frames $ 401,80 per hour BG PAGAM Req1 Reg 2 Reg 3 Req 4A Req 4B Reg 5 Reg 6 Req 7A Reg 78 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 WVD drums 3.900 3,375 Bike frames 1,900 1,900 PARS Req 1 Reg 2 Reg 3 Req 4A Req 4B Req5 Reg 6 Req 7A Req 7B What is the increase (decrease) in net operating income that would result from this plan over current operations? [Assume direct labor is a fixed cost] (Round your intermediate calculations to 2 decimal places and Round final answer to the nearest whole dollar value.) Increase (decrone) in net operating income $ 170,685 Req 1 Reg 2 Reg 3 Req 4A Req 4B Req 5 Req 6 Req 7A Req 7B 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.) Contribution Margin Purchased WVD drums $ 25.25 per unit Manufactured WVD drums $ 148.20 per unit Manufactured bike frames 148.10 per unit $ Reg 2 Req3 Req 4A Reg 4B Reg 1 Req 5 Reg 6 Req ZA Req 7B Assuming direct labor is a variable cost, compute the contribution margin per welding hour for (Round your intermediate calculations and final answers to 2 decimal places.) Contribution Margin Manufactured WVD drums $ 370,50 per hour Manufactured bike frames 296.20 per hour