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TufStuff, 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 welds A total of 2,220 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 5.550 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 7175 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 Industies, Incorporated, a supplier of quality products, would be able to provide up to 4,550 WVD-type drums per year at a price of $171 per drum, which TuIStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, Tursturf's production manager, has suggested that the company could make belter use of the weiding machine by manufacturing bike frames, which would require only 05 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TurStuff could sell up to 1,820 bike frames per yeat to bike manufacturers at a price of $294 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 overheadis 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 \$1,90 per bike frame. The variable manufacturing overhead cost would not be incumed on drums acquired from the outside supplier. Selling and administative expenses are allocated to products on the basis of tevenues. 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 $2.40 per bike frame. All of the compeny'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 tecessons As soon as your analysis 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 decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has always been considered a varlable cost at TufStuff. 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 Tuistuif 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 regulat 40 .00-hour workweek and overtime has not been necessary since the company adopted Lean Production lechnicues. Whether the welding machine is used to make drums or frames, the tolal payroll would be exactly the same. Thereis enough slack, in the form of olle ume, to accommodate any increase in total direct labor ume 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 matgin per unit. [assume direct labor is a fixed cost] 3. Compute the contribution margin per welding hour. [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 curtent operations? 5. Compute the contibution margin per unit [assume direct labor is a variable cost] 6. Compute the contribution margin per welding hour. [assume direct labor is a variable cost] 7. Assuming direcl 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 resuit from this plan over current operations? 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 calculations. Round your answers to 2 decimal placesi) TutStuft, Incorporated, sells a wide range of drums, bins, bokes, 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 welds. A total of 2.220 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 5,550 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 7,175 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 4.550 WVD-type drums per year at a price of $171 per drum, which TurStuff would resell to its customers at its normal selling price after appropriate relabelling Megan Flores, TurStuff's production manager, has suggested that the company could make better use of the welding 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 1,820 bike frames per year to bike manufacturers at a price of $294 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 it is variable. The variable manufacturing overhead has been estimated at $1.35 per WVD drum and $1,90 per bike frame. The variable manufacturing overhead cost would not be incurred on drums acquired from the outside suppliec. 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 $2.40 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 tecessions. As soon as your analysis 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 decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has alwoys 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 strenuousiy that direct iabor 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 40.00 -hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the weiding machine is used to make orums 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: 1. Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVo drums and bike frames? 2. Compute the contribution margin per unit. [assume direct labor is a fixed cost]] 3. Compute the contribution margin per weiding hour. [assume direct labor is a fixed cost] Required: 1. Would you be comfortable relying on the financial data provided by the accouming department for making decisions related to the WVD drums and bike frames? 2. Compute the contribution margin per unit. [assume direct labor is a fixed cost) 3. Compute the contribution margin per welding hour. [assume direct labor is a foued cost] 4. Assuming dieect labor is a foxed cost. a. Determine the number of WVD drums (f any) that should be purchased and the number of WD drums andior bike frames (If any) that shouid be manufactured. b. What is the increase (dectease) in net operating income that would result from this plan over current operations? 5, Compute the contribution margin per unit [assume direct laboc is a variable cost] 6. Compute the contribution matgin per weiding hour, [assume direct labor is a varlable cost] 7. Assuming direct tabor is a vatiable cost a. Determine the number of WVO drums (ff any) that should be purchased and the number of WVD drums andor bike frames (f any) thit sthould be mandactured. b. What is the increase (decrease) in net operating income that would iesiat trom this plan over current operations? Complete this question by entering your answers in the tabs below. Compute the contitution margin per unit, tassume direct laber is a fixed cosu) (Do not round intermedute cakvulions. Fodred vou arswers to 2 decimal piaces.] TufStuff, 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 welds A total of 2,220 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 5.550 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 7175 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 Industies, Incorporated, a supplier of quality products, would be able to provide up to 4,550 WVD-type drums per year at a price of $171 per drum, which TuIStuff would resell to its customers at its normal selling price after appropriate relabeling Megan Flores, Tursturf's production manager, has suggested that the company could make belter use of the weiding machine by manufacturing bike frames, which would require only 05 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TurStuff could sell up to 1,820 bike frames per yeat to bike manufacturers at a price of $294 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 overheadis 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 \$1,90 per bike frame. The variable manufacturing overhead cost would not be incumed on drums acquired from the outside supplier. Selling and administative expenses are allocated to products on the basis of tevenues. 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 $2.40 per bike frame. All of the compeny'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 tecessons As soon as your analysis 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 decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has always been considered a varlable cost at TufStuff. 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 Tuistuif 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 regulat 40 .00-hour workweek and overtime has not been necessary since the company adopted Lean Production lechnicues. Whether the welding machine is used to make drums or frames, the tolal payroll would be exactly the same. Thereis enough slack, in the form of olle ume, to accommodate any increase in total direct labor ume 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 matgin per unit. [assume direct labor is a fixed cost] 3. Compute the contribution margin per welding hour. [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 curtent operations? 5. Compute the contibution margin per unit [assume direct labor is a variable cost] 6. Compute the contribution margin per welding hour. [assume direct labor is a variable cost] 7. Assuming direcl 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 resuit from this plan over current operations? 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 calculations. Round your answers to 2 decimal placesi) TutStuft, Incorporated, sells a wide range of drums, bins, bokes, 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 welds. A total of 2.220 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 5,550 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 7,175 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 4.550 WVD-type drums per year at a price of $171 per drum, which TurStuff would resell to its customers at its normal selling price after appropriate relabelling Megan Flores, TurStuff's production manager, has suggested that the company could make better use of the welding 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 1,820 bike frames per year to bike manufacturers at a price of $294 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 it is variable. The variable manufacturing overhead has been estimated at $1.35 per WVD drum and $1,90 per bike frame. The variable manufacturing overhead cost would not be incurred on drums acquired from the outside suppliec. 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 $2.40 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 tecessions. As soon as your analysis 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 decision. One manager argued that direct labor is always treated as a variable cost in textbooks and in practice and has alwoys 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 strenuousiy that direct iabor 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 40.00 -hour workweek and overtime has not been necessary since the company adopted Lean Production techniques. Whether the weiding machine is used to make orums 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: 1. Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WVo drums and bike frames? 2. Compute the contribution margin per unit. [assume direct labor is a fixed cost]] 3. Compute the contribution margin per weiding hour. [assume direct labor is a fixed cost] Required: 1. Would you be comfortable relying on the financial data provided by the accouming department for making decisions related to the WVD drums and bike frames? 2. Compute the contribution margin per unit. [assume direct labor is a fixed cost) 3. Compute the contribution margin per welding hour. [assume direct labor is a foued cost] 4. Assuming dieect labor is a foxed cost. a. Determine the number of WVD drums (f any) that should be purchased and the number of WD drums andior bike frames (If any) that shouid be manufactured. b. What is the increase (dectease) in net operating income that would result from this plan over current operations? 5, Compute the contribution margin per unit [assume direct laboc is a variable cost] 6. Compute the contribution matgin per weiding hour, [assume direct labor is a varlable cost] 7. Assuming direct tabor is a vatiable cost a. Determine the number of WVO drums (ff any) that should be purchased and the number of WVD drums andor bike frames (f any) thit sthould be mandactured. b. What is the increase (decrease) in net operating income that would iesiat trom this plan over current operations? Complete this question by entering your answers in the tabs below. Compute the contitution margin per unit, tassume direct laber is a fixed cosu) (Do not round intermedute cakvulions. Fodred vou arswers to 2 decimal piaces.]