TufSturf, 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 weids. A total of 2,100 hours of welding time is avallable 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 financial data concerning the WVD drums. Management believes 6.125 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 4.250 WVD-type drums per year at a price of \( \$ 153 \) 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 weiding 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 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: 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 buliding. but some of in is variable The varible manufacturing overhead has been estimated at \( \$ 1.35 \) per WivD drum and \( \$ 190 \) per bike frame. The variable manufacturing overhead cost would not be incurred on drums acquiled from the outside supplier Selling and administrative expenses ate allocated to procucts on the basis of revenues. Almost ali of the seling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to \( \$ .75 \) per WVD drum whether made or purchased and would be \( \$ 1.80 \) per bike frame
Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to \( \$ 75 \) per WVD drum whether made or purchased and would be \( \$ 1.80 \) 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 TufStuff, several managers got into an argument conceming how direct labor costs should be treated when making this decision. One manager argued that direct iabor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TurStuff After all, "direct" means you can directly trace the cost to products. If direct labor is not a variable cost, what is? Another manager argued just as strenuously that direct labor should be considered a fixed cost at TufStuff No one had been laid off in over a decade, and for ali 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 welding machine is used to make drums or frames. the total payroli would be exactly the same. There is enough stack, in the form of idle time, to accommodate any increase in total direct 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 contribuuon margin per unit [assume direct labor is a fixed cost] 3. Compute the contrbution margin per weiding hour. [assume direct labor is a fixed cost] 4. Assuming direct labor is a fored cost a. Determine the number of WVD drums (f any) that should be puichased and the number of WVD drums andior bike frames (if any) that should be mansfactured 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 [assume direct labor is a variable cost] 6. Compite the contribution margin per welaing hour. [assume direct labor is a vartabie 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 WVO drums andior bake frames (if amy) 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.
Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a fixed cost] (Do not round intermediate calculation Round your answers to 2 decimal places.)
Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a fixed cost] (Round your intermediate calculations and final answers to 2 decimal places.)
Complete this question by entering your answers in the tabs below. 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 fixed cost]
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 fixed cost) [Round your intermediate calculations to 2 decimal places. Round final artswer to the nearegt Whole dollar value.)
Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a variable cost] (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a variable cost] (Round your intermedlate calculations and final answers to 2 decimal places.)
Complete this question by entering your answers in the tabs below. [Assume direct labor is a variable cost]. 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.
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.)
TufSturf, 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 weids. A total of 2,100 hours of welding time is avallable 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 financial data concerning the WVD drums. Management believes 6.125 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 4.250 WVD-type drums per year at a price of $153 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 weiding 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 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: 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 buliding. but some of in is variable The varible manufacturing overhead has been estimated at $1.35 per WivD drum and $190 per bike frame. The variable manufacturing overhead cost would not be incurred on drums acquiled from the outside supplier Selling and administrative expenses ate allocated to procucts on the basis of revenues. Almost ali of the seling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $.75 per WVD drum whether made or purchased and would be $1.80 per bike frame Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $75 per WVD drum whether made or purchased and would be $1.80 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 TufStuff, several managers got into an argument conceming how direct labor costs should be treated when making this decision. One manager argued that direct iabor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TurStuff After all, "direct" means you can directly trace the cost to products. If direct labor is not a variable cost, what is? Another manager argued just as strenuously that direct labor should be considered a fixed cost at TufStuff No one had been laid off in over a decade, and for ali 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 welding machine is used to make drums or frames. the total payroli would be exactly the same. There is enough stack, in the form of idle time, to accommodate any increase in total direct 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 contribuuon margin per unit [assume direct labor is a fixed cost] 3. Compute the contrbution margin per weiding hour. [assume direct labor is a fixed cost] 4. Assuming direct labor is a fored cost a. Determine the number of WVD drums (f any) that should be puichased and the number of WVD drums andior bike frames (if any) that should be mansfactured 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 [assume direct labor is a variable cost] 6. Compite the contribution margin per welaing hour. [assume direct labor is a vartabie 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 WVO drums andior bake frames (if amy) 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. Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a fixed cost] (Do not round intermediate calculation Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a fixed cost] (Round your intermediate calculations and final answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. 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 fixed cost] 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 fixed cost) [Round your intermediate calculations to 2 decimal places. Round final artswer to the nearegt Whole dollar value.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a variable cost] (Do not round intermediate calculations. Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a variable cost] (Round your intermedlate calculations and final answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. [Assume direct labor is a variable cost]. 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. 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.) TufSturf, 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 weids. A total of 2,100 hours of welding time is avallable 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 financial data concerning the WVD drums. Management believes 6.125 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 4.250 WVD-type drums per year at a price of $153 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 weiding 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 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: 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 buliding. but some of in is variable The varible manufacturing overhead has been estimated at $1.35 per WivD drum and $190 per bike frame. The variable manufacturing overhead cost would not be incurred on drums acquiled from the outside supplier Selling and administrative expenses ate allocated to procucts on the basis of revenues. Almost ali of the seling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $.75 per WVD drum whether made or purchased and would be $1.80 per bike frame Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $75 per WVD drum whether made or purchased and would be $1.80 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 TufStuff, several managers got into an argument conceming how direct labor costs should be treated when making this decision. One manager argued that direct iabor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TurStuff After all, "direct" means you can directly trace the cost to products. If direct labor is not a variable cost, what is? Another manager argued just as strenuously that direct labor should be considered a fixed cost at TufStuff No one had been laid off in over a decade, and for ali 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 welding machine is used to make drums or frames. the total payroli would be exactly the same. There is enough stack, in the form of idle time, to accommodate any increase in total direct 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 contribuuon margin per unit [assume direct labor is a fixed cost] 3. Compute the contrbution margin per weiding hour. [assume direct labor is a fixed cost] 4. Assuming direct labor is a fored cost a. Determine the number of WVD drums (f any) that should be puichased and the number of WVD drums andior bike frames (if any) that should be mansfactured 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 [assume direct labor is a variable cost] 6. Compite the contribution margin per welaing hour. [assume direct labor is a vartabie 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 WVO drums andior bake frames (if amy) 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. Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a fixed cost] (Do not round intermediate calculation Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a fixed cost] (Round your intermediate calculations and final answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. 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 fixed cost] 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 fixed cost) [Round your intermediate calculations to 2 decimal places. Round final artswer to the nearegt Whole dollar value.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per unit. [assume direct labor is a variable cost] (Do not round intermediate calculations. Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. Compute the contribution margin per welding hour. [assume direct labor is a variable cost] (Round your intermedlate calculations and final answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. [Assume direct labor is a variable cost]. 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. 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.)
