**ONLY NEED 4A,4B, 7A, AND 7B!!!**

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 $190 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 fined common costs, but it has been estimated that variable selling and administrative expenses amount to $0.75 per WVO drum whether made or purchased and would be $3.00 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 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 argued that direct laboris always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at Tuftuff. After all, "direct" means you can directly trace the cost to products. " direct laboris not a variable cost, what is?" Another manager argued just as strenuously that direct labor should be considered a foed cost at Tuftuft 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 40.00 hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the wolding machine is used to make drums or frames, the total wyroll would be exactly the same. There is enough slack, in the form of idle time, to accommodate any increase in total direct Inbot time that the bike frames would require Required: Would you be comfortable relying on the financial data provided by the accounting department for making decisions reluted to the 2. Compute the contribution margin per unit for fassume direct loborsafoed cont 3. Comote the contribution margin per welding hour forfassume director is a fixed cost) 4 Assuming direct laboris fed COM Determine the number of WD drums (if any) that should be purchased and me number of WVD drums and/or bike frames are 1. What is the is the increase decrease in net operating income that would result from this plan over current operations? 5. Compute the contribution are per unit forfassume direct laboris variable cost 5. Compute the contribution margin er welding hour forme direct laboris a variable cost 7. Assuming direct laboris a varietie cost Determine the number of WVD of any that should be purchased and the number of WVD drums and/or bike frames or any

ME GEW 2 S 5 6 8 E R T P S F G j K Z V B N M labor time that the bike frames would require. 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? 2. Compute the contribution margin per unit for (assume direct labor is a fixed cost] 3. Compute the contribution margin per welding hour for (assume direct labor is a fixed cost] 4. Assuming direct labor is a fixed cost: a. 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. b. What is the increase (decrease) in net operating income that would result from this plan over current operations? 5. Compute the contribution margin per unit for (assume direct labor is a variable cost] 6. Compute the contribution margin per welding hour for (assume direct labor is a variable cost] 7. Assuming direct labor is a variable cost: a. 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) b. What is the increase (decrease) in net operating income that would result from this plan over current operations