plant is on a monthly salary. Everyone classified as direct labor works a regular $40\mathrm{.}00-$hour 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 frames would require.

Required:

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?

Compute the contribution margin per unit. $[$assume direct labor is a fixed cost$]$

Compute the contribution margin per welding hour. $[$assume direct labor is a fixed cost$]$

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?

Compute the contribution margin per unit. $[$assume direct labor is a variable cost$]$

Compute the contribution margin per welding hour. $[$assume direct labor is a variable cost$]$

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.

b$.$ What is the increase $($decrease$)$ in net operating income that would result from this plan over current operations?

Complete this question by entering your answers in the tabs below.

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