Situation 1: Labor cost classification (10 Points) Company has recently opened a plant in Bermuda in order to take advantage of certain tax at benefits. In order to quality for these tax benefits, the company's direct manufacturing labor costs must be least 20% of total manufacturing costs for the period. normally classifies manufacturing wages as manufacturing labor, but classifies fringe benefits, overtime premiums, idle time, and vacation time and sick leave as indirect manufacturing labor (part manufacturing overheads). During the first period of operations in Bermuda, ABC incurs a total ofs2,500,000 in manufacturing costs. Of that, S410,000 is direct manufacturing labor wages, s45,000 is ertime premium, s86,000 is fringe benefits, is vacation time and sick leave, and S10,900 is idle time. Required 1. Based on ABC Manufacturing Company's normal cost classification practices, is the company likely to quality for the for the tax benefit? Show you calculations. (2 Points) 2. Bob the manager of new Bermuda plant, is concerned that he will not get a bonus this y Ryan, get Describe Two specific adjustments to ABC because the plant not the tax benefit. Manufacturing normal cost classification practices that Bod Ryan might ask the plant controller to make ensure that ABC gets the tax benefit? (Be very specific in your response). Provide a specific rationale that Bod Ryan might use to justify each of the adjustments you described above. (4 Point) 3. Indicate whether the plant controller should make EACH of the Two adjustments you described in part 2 above. Support your opinion with appropriate and logical arguments. (4 Points) Situation 2: CVP Analysis (5 Points) Aranguez Corporation produces a molded plastic casing, LX20A, for desktop computers. Summary data from its 2013 income statement are as follows: 8,000,000 Revenues 4,800,000 Variable costs 3,000,000 Fixed costs 200,000 Operating income Jane Dall, Aranguez's president, is very concerned about Aranguez Corporation's poor profitability. She asks Giselle James, production manager, and Lester Saline, controller, to see if there are ways to reduce costs After two weeks, James returns with a proposal to reduce variable costs to 50% of revenues by reducing the costs Aranguez currently incurs for safe disposal of waste plastic. Saline is concerned that this would expose the company to potential environmental liabilities. He tells James, "We would need to estimate some of these potential environmental costs and include them in our analysis." "You cannot do that," James replies. "We are