ints TufStuff, Incorporated, 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 2,460 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 6,150 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: eBook References Print MVD Druna Selling price per drun Direct materials - Cost per drum Direct labor ($41 per hour) Manufacturing overhead $241.00 $52.10 8.20 18.30 Belling and administrative expense 34.40 Margin per drum 113.00 $128.00 Mc Graw Hill Management believes 7,475 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, Incorporated, a supplier of quality products, would be able to provide up to 5,150 WVD-type drums per year at a price of $207 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 0.5 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 2,060 bike frames per year to bike manufacturers at a price of $354 each. The accounting department has provided the following data concerning the proposed new product: Selling price per frane Cost per frame Direct materials Dike Franes $ 354.00 $113.20