Material costs are assigned directly to the tires. Last month, VTC manufactured 27,000 VTC/A105 and 7,000 VTC/B107 tires. VTC/A105 is a more popular tire that is produced in larger batches than VTC/B107. Additionally, the average direct materials costs for VTC/A105 and VTC/B107 are $64 and $98, respectively. While the VTC/A105 fits on a common family car or van, the VTC/B107 is not suitable for the family vehicles because it is slightly larger size. The direct labor hours used to produce VTC/A105 and VTC/B107 were: VTC/A105 14,000 direct labor hours VTC/B107 3,500 direct labor hours Part 1 Alfred Olson has provided you with the first data set. In addition, he has informed you that VTC is currently assigning conversion costs to all tires based on the average conversion cost per direct labor hour for the 48 observations. James Jetter, the CEO of VTC, would like to know the total costs and unit costs for VTC/A105 and VTC/B107. Besides providing James with the product costs for VTC/A105 and VTC/B107, he would like to know the strength of the relationship between direct labor hours and total conversion costs. Has this relationship improved or weakened since automation? How do you feel about your calculations for the product costs of VTC/A105 and VTC/B107? Why or why not? Provide James Jetter with a short memo summarizing your findings. Address the following questions in your memo.

How much of the conversion costs should be assigned to VTC/A105 and VTC/B107 assuming a single plant-wide rate?

Calculate the unit costs for VTC/A105 and VTC/B107.

What is the new correlation between total conversion costs and direct labor hours (DLH)?

What can you say about the new correlation when compared to the old correlation calculated before automation took place?

Observations	DLH	Total Costs
1	120,500	22,824,090
2	104,000	20,701,900
3	105,000	18,066,500
4	106,000	19,930,030
5	100,000	21,109,750
6	92,500	18,634,840
7	93,500	18,083,500
8	88,000	17,106,050
9	100,500	17,833,000
10	95,500	18,112,220
11	97,000	18,028,670
12	102,250	18,044,790
13	99,500	20,047,850
14	96,650	18,217,060
15	85,000	19,414,650
16	91,850	18,606,890
17	91,250	18,762,000
18	98,500	19,012,920
19	112,500	18,961,100
20	98,400	19,030,110
21	112,000	19,216,510
22	101,000	19,129,250
23	81,600	19,900,470
24	90,400	21,624,540
25	86,000	20,100,100
26	115,500	19,439,320
27	92,650	20,083,870
28	97,950	19,897,510
29	91,000	20,139,570
30	98,000	20,032,270
31	122,000	20,373,710
32	101,500	19,954,440
33	92,000	20,438,940
34	84,000	21,249,000
35	116,000	19,880,250
36	90,500	20,888,370
37	98,250	17,498,700
38	99,350	19,997,270
39	104,400	19,212,240
40	94,000	18,033,930
41	100,750	18,498,230
42	102,150	21,305,650
43	80,000	17,462,200
44	87,000	17,235,150
45	96,500	17,136,250
46	88,500	17,494,630
47	119,000	19,720,800
48	96,000	17,759,260