TutStuff, Inc, 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 2.460 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 6150 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 $241.00 WO DURS Selling price per deum Cost per drum Direct materials Direct labor (541 per hour) Manufacturing overhead Selling and adinistrative pente Marginner du 552.10 820 18. 113.00 5128.00 Management believes 7475 WVD drums could be sold each year if the company had suficient manufacturing capacity. As an altetomive to adding another welding machine, management has considered buying additional drums from an outside supplier, Marco Industries Inc a supplier of quality products, would be able to provide up to 5 150 WD type drums per year at a price of $207 per dium, which Torstutt would resell to its customers at its normal selling price after appropetate relabeling Megan Fores. Totsturs production manager bas 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 trame and yet sell for far more than the drum, Megan believes that TurStuff could sell up to 2060 bike fromes per year to bike manufacturers at a price of $ 254 each. The accounting department has provided the following data concerning the proposed new product Nie SWE Selling price from Cost Direct materials 5113.20 $ 354.00 Bike Frames Selling price per frane Cost per frame Direct materials Direct Labor ($18 per hour) Manufacturing overhead selling and administrative expense Margin per frame $113.20 65.60 59.00 66.20 304,00 $50.00 37 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 building, but some of it is valable. 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 supplier 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 $3.60 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 Turstutt several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued that direct laboris always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TulStuft. After all, "direct" means you can directly trace the cost to products, ir direct laboris not a variable cost, what is?" Another manager argued just as strenuously that direct labor should be considered a fixed cost at TurStutt No one had been taid 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 welding machine is used to make drums or frames the total payroll 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 contribution margin 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 drurns and/or bike frames of any) that should be manufactured 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. Compute the contribution margin per welding hout (assume direct labor is a variable 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 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. Rea 1 Reg 2 Rega RA Reg 40 Reqs Rego Req 7A Reg 78 Would you be comfortable relying on the financial data provided by the accounting department for making decisions related to the WV drums and bike frames Yes NO Red 5. Compute the contribution 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 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 fram 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. Reg 1 Reg 2 Reg 3 Req 4A Reg 4B Req5 Reg 6 Reg 7A Reg 78 Compute the contribution margin per unit. (assume direct labor is a fixed cost] (Do not round intermediate calculations Round your answers to 2 decimal places.) Contribution Margin per unit a Purchased WVD drums Manufactured WD drums Manufactured bike frames per unit per unit 5. Compute the contribution 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 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. Reg 1 Reg 2 Reg 3 Req 4A Reg 4B Reg 5 Reg 6 Req 7A Reg 78 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) Contribution Margin 1 Manufactured WD drums per hour per hour 2 Manufactured bike frames 5. Compute the contribution 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 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) b. What is the increase (decrease) in net operating income that would result from this plan over current operations? that should be manufactured, Complete this question by entering your answers in the tabs below. Req1 Reg 2 Req3 Reg Reg 48 Reg 5 Rego Reg 2A Reg 70 Determine the number of WVD drums f any) that should be purchased and the number of WVD drums and/or bike frames ( any) that should be manufactured. Assume direct labor is a fixed cost] Purchased Manufactured WVD drums Bike Times Saved 5. Compute the contribution 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 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 fra b. What is the increase (decrease) in net operating Income that would result from this plan over current operations? that should be manufactured. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Req 4A Req 48 Reg 5 Reg 6 Reg 78 Reg 7A 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 answer to the nearest whole dollar value.) increase (decreaso) in not operating income 5. Compute the contribution 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 direct labor is a variable costs 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? 524 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 4 Reas Reg 6 Reg 7A Reg 78 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.) Purchased WVD drums Manufactured WD drums Manufactured bike frames Contribution Margin per unit (per und por unit 5. Compute the contribution 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 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 a that should be manufactured, b. What is the increase (decrease) in net operating Income that would result from this plan over current operations? 8 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg 45 Reg 5 Real Reg 7A Req 78 Compute the contribution margin per welding hour (assume direct labor is a variable cost) (Round your intermediate calculations and final answers to 2 decimal places.) Contribution Margin Manufactured WWE drums Manufactured bike frames por hour per hour 5. Compute the contribution margin per unit (assume direct labor is a variable cost) 6. Compute the contribution margin per welding hour assume direct laboris a variable cost) 7. Assuming direct laboris 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? 12440 Complete this question by entering your answers in the tabs below. Feg1 Reg 2 Regs Reg R 40 Reg 5 Rego Red A Reg 70 RES Asume direct labor is a variable cont). Determine the number of WVD drums (raw) that should be purchased and the number of WVO drums and/or bike frames if any) that should be manufactured Purchased Manufactured W drums Bikermes 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. Compute the contribution margin per welding hour. [assume direct labor is a variable 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 WVD drums and/or bike frames ( 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. Reg 1 Reg 2 Reg 3 Req 4A Reg 40 Reg 5 Reg 6 RegTA Reg 28 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