Please answer all requiered managerial accounting questions.

TufStuff, Incorporated. sells a wide range of drums. bins, boxes. and other containers that are used In the chemical industry. one of thc products Is 0 heovy.duty corrosion.rcslstont metol drum, coiled thc WVO drum, used to store toxic wastes. Production Is constrained by the capacity of on automated welding machine thot Is used to moke precision welds, A total of 2,100 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 5.250 drums. At present, the welding machine is used exclusively to make the wVD drums. The accounting department has provided the following nnonciol doto concerning the WVD drums: WD Drums s 169. Selling price per dr(B Cost per drua: Direct naterials Direct labor ($23 per hour) Hanufacturing overhead Selling and administrative expense Margin per drun s 52.10 4.60 7.50 95. 30.80 $ 74. Management believes 6.125 WVD drums coutd be sold each year if thc company had sufficient manufacturing capacity. As on otternotive to adding onother welding machine, monagcment hos consldcrcd buying additional drums from on outsldc supplier. Harcot Industries. Incorporated, a supplier of quality products, would be abte to provide up to 4.250 VNDtype drums per year at a price of SIS3 per drum, which TufStuff would resell to its customers at its normal selling price after appropriate relabeling. Megan Flores, TufStuff's production manager, hos suggested thot the compony could moke better use of thc welding mochlnc by manufacturing bike frames. which would require only O.S hours of welding machine time per frame and yot sell for far more than the drums. Megan believes that TufStuff could sell up to 1,700 bike frames per year to bike manufacturers at a price of $264 each. The accounting department has provided the following data concerning the proposed new product: Bike Frames Selling price per fraze Cost per frate: Direct materials Direct labor ($18 er hour) Manufacturing over{ead Selling and administrative expense Margin per frame s 264 s 102.40 36.0 41.0 232. 51.80 $ 32. 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 os rent on the factory building, but some of it Is variable. Thc vorioble manufacturing overhead hos been estimated ot $1,3S per VND drum and SISO 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 orc fixed common costs, but it hos bccn cstimotcd thot variable selling ond admlnlstrotlvc expenses amount to $.75 per WVD drum whether made or purchased and would bc $1.80 per bike frame. All of the company's employeesdirect and Indirectare pald for full 40.00.hour work weeks and the company has a policy of tayfng off workers onty in moJor recessions. As soon as your anats was shown to the top management team at TufStuff, several managers got into an argument concerning how direct labor costs should be treated when making this declslon. One manager argued that direct labor Is always treated as a variable cost In textbooks and In practice and has always been considered a variable cost ot TufStuff. After all, -direct" means you can directly trace thc cost to products. "If direct labor Is not o voriobte cost, whot Is?" Another manager argued Just os strenuously thot direct labor should be considered a fixed cost at TufStuff. 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 40.00hour 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 some. There Is enough slack. In the form of Idle time, to accommodate any increase In total direct Required: 1. Would you be comfortable relying on the financial data provided by the accounting department ror making decisions related to the 2. Compute the contributjon margln per unit. (assume direct labor Is a fixed cost) 3. Compute the contribution margin per welding hour. (assume direct labor is a fixed cost) o. Determine the number of WVO drums (if any) thot should be purchased and the number of VWD drums and/or bike frames (if any) b. What is the increase (decrease) in net operating income that would result from this plan over current operations?