Using the information provided please help answering these questions:

5. As part of his cost-reduction efforts, Lockden is interested in reducing labor costs. He asks you to evaluate the financial impact of a proposal involving an alternative labor contract for manual finishing labor (LH075). Under the proposed contract, the company would guarantee a 40-hour workweek for these employees. The hourly wage under the guaranteed 40-hour workweek would be $14 instead of $15. Based on the number of LH075 employees that the company plans to employ, this means that the company is committed to paying its LH075 employees for 1,600 hours each month, even if there is not enough work to keep them busy. If the number of LH075 labor hours per month is higher than 1,600 hours, LH075 employees will receive time-and-a-half overtime pay. LB075 labor hours will not be impacted.

To fulfil Lockden's request, first, insert a new worksheet at the end of the Excel template and set up a new direct labor budget (only for LH075). Then, answer the following questions:

a. Calculate the LH075 cost for each month in the first quarter and the total cost for the first quarter under the proposed labor contract.

b. If Lockden's primary objective is cost reduction, would you recommend the proposed labor contract?

c. What other factors besides cost minimization should be considered in evaluating each option?

d. Given the uncertainties looming over 2020, which option (the existing labor arrangement or the proposed scenario) would you recommend? Explain why.

Lockitt Inc. 20200 perating Bindget Dete 5heek \begin{tabular}{|l|c|} \hline Meterielt enentiky per Daraleck & Input suantikyper unit af autput \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Labar Rate & Haurlyrato \\ \hline LE075 & $30 \\ \hline LH075 & $15 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Lebar Urate & \\ \hline LE075 (haursporbatsh) & 1 \\ \hline LH075 (Haurspor unit) & 0.10 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Bakek rixt & \\ \hline Duralasks perbateh & 50 \\ \hline \end{tabular} Bincl size Duralocks per batch 50 \begin{tabular}{|l|c|} \hline Yariable 0H & \\ \hline Per batch & $1,000 \\ \hline Per direct labor hour & $50 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Selling and hdnin & \\ \hline Fixed, per month & 50,000 \\ \hlineV ariable, percentage of revenue & 37 \\ \hline \end{tabular} Standard Cost Sheet for the Product for Q1 Sales Budget Sales (units) Selling Price Sales Revenue (\$) Production Budget (all in Units) Sales (Units) Ending Inventory (with Constraint) Beginning Inventory Production Cross- footing 49,080 check Direct Materials Purchase Budget Direct Materials Budget (LD-paste) Quantity required for production (Ibs.) Ending inventory (lbs.) Beginning inventory (Ibs.) Purchases (Ibs.) Cost (\$) \begin{tabular}{|r|r|r|r|r|r|} \hline 31,700 & 33,020 & 33,440 & 98,160 & 35,580 & 35,420 \\ \hline 1,651 & 1,672 & 1,779 & 5,102 & 1,771 & 0 \\ \hline(1,585) & (1,651) & (1,672) & (4,908) & (1,779) & 0 \\ \hline 31,766 & 33,041 & 33,547 & 98,354 & 35,572 & 0 \\ \hline 325,601.50 & 338,670.25 & 343,856.75 & 1,008,128.50 & 364,613.00 & 0 \\ \hline \end{tabular} Cross- footing 1,008,128.50 check Direct Materials Budget (Chem-glue) Quantity required for production ( ml ) Ending inventory (with constraint) ( ml ) Beginning inventory (ml) Purchases (ml) cost (\$) \begin{tabular}{|r|r|r|r|r|r|} \hline 5,547,500 & 5,778,500 & 5,852,000 & 17,178,000 & 6,226,500 & 6,198,500 \\ \hline 288,925 & 292,600 & 300,000 & 881,525 & 300,000 & 0 \\ \hline(277,375) & (288,925) & (292,600) & (858,900) & (311,325) & 0 \\ \hline 5,559,050 & 5,782,175 & 5,859,400 & 17,200,625 & 6,215,175 & 0 \\ \hline 277,952.50 & 289,108.75 & 292,970.00 & 860,031.25 & 310,758.75 & 0 \\ \hline \end{tabular} Total Direct Materials Purchase Cost \begin{tabular}{|c|c|c|c|} \hline 603,554.00 & 627,779.00 & 636,826.75 & 1,868,159.75 \\ \hline \hline & & Crossfooting check & 1,868,159.75 \\ \hline \end{tabular} Direct Labor Budget JanuaryFebruaryMarchQTR Direct Labor LB075 Batches of production (original) Batches of production (whole number) LB075 labor hours needed Direct labor cost-LB075 Direct Labor LH075 Direct Labor hours needed Direct labor cost LH075 \begin{tabular}{|c|r|r|c|} \hline 1,580 & 1,650 & 1,660 & 4,890 \\ \hline$23,700 & $24,750 & $24,900 & $73,350 \\ \hline \end{tabular} Total labor cost Cross footing check Manufacturing Overhead Budget Number of batches Total direct labor hours (LB075 and LH075) \begin{tabular}{|c|c|c|c|} \multicolumn{1}{l}{ January } & \multicolumn{1}{l}{ February } & \multicolumn{1}{l|}{ March } & \multicolumn{1}{l|}{ QTR } \\ \hline 317 & 330 & 334 & 982 \\ \hline 1,897 & 1,981 & 1,995 & 5,873 \\ \hline \end{tabular} Variable Overhead Batch-related variable overhead cost Direct labor hour-related variable overhead cost Total variable OH cost Fixed Overhead \begin{tabular}{|r|r|r|r|} \hline 40,000 & 40,000 & 40,000 & 120,000 \\ \hline 451,850 & 469,250 & 474,150 & 1,395,250 \\ \hline \hline \multicolumn{3}{|c|}{ Cross-footing } \\ & \multicolumn{1}{|c|}{1,395,250} \end{tabular} S. A Budget Revenue Fixed S\&A expenses Lockitt Inc., Budgeted Income Statement Quarter ended March 31 Revenue Cost of Goods Sold Gross Profit Selling and Admin Expense Income from operations before tax \begin{tabular}{|r|r|} \multicolumn{2}{|c|}{%} \\ \hline 4,303,200 & 100% \\ 3,351,850 & 78% \\ \hline 951,350 & 22% \\ 279,096 & 6% \\ \hline 672,254 & 16% \\ \hline \hline \end{tabular} Lockitt Inc. 20200 perating Bindget Dete 5heek \begin{tabular}{|l|c|} \hline Meterielt enentiky per Daraleck & Input suantikyper unit af autput \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Labar Rate & Haurlyrato \\ \hline LE075 & $30 \\ \hline LH075 & $15 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Lebar Urate & \\ \hline LE075 (haursporbatsh) & 1 \\ \hline LH075 (Haurspor unit) & 0.10 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Bakek rixt & \\ \hline Duralasks perbateh & 50 \\ \hline \end{tabular} Bincl size Duralocks per batch 50 \begin{tabular}{|l|c|} \hline Yariable 0H & \\ \hline Per batch & $1,000 \\ \hline Per direct labor hour & $50 \\ \hline \end{tabular} \begin{tabular}{|l|c|} \hline Selling and hdnin & \\ \hline Fixed, per month & 50,000 \\ \hlineV ariable, percentage of revenue & 37 \\ \hline \end{tabular} Standard Cost Sheet for the Product for Q1 Sales Budget Sales (units) Selling Price Sales Revenue (\$) Production Budget (all in Units) Sales (Units) Ending Inventory (with Constraint) Beginning Inventory Production Cross- footing 49,080 check Direct Materials Purchase Budget Direct Materials Budget (LD-paste) Quantity required for production (Ibs.) Ending inventory (lbs.) Beginning inventory (Ibs.) Purchases (Ibs.) Cost (\$) \begin{tabular}{|r|r|r|r|r|r|} \hline 31,700 & 33,020 & 33,440 & 98,160 & 35,580 & 35,420 \\ \hline 1,651 & 1,672 & 1,779 & 5,102 & 1,771 & 0 \\ \hline(1,585) & (1,651) & (1,672) & (4,908) & (1,779) & 0 \\ \hline 31,766 & 33,041 & 33,547 & 98,354 & 35,572 & 0 \\ \hline 325,601.50 & 338,670.25 & 343,856.75 & 1,008,128.50 & 364,613.00 & 0 \\ \hline \end{tabular} Cross- footing 1,008,128.50 check Direct Materials Budget (Chem-glue) Quantity required for production ( ml ) Ending inventory (with constraint) ( ml ) Beginning inventory (ml) Purchases (ml) cost (\$) \begin{tabular}{|r|r|r|r|r|r|} \hline 5,547,500 & 5,778,500 & 5,852,000 & 17,178,000 & 6,226,500 & 6,198,500 \\ \hline 288,925 & 292,600 & 300,000 & 881,525 & 300,000 & 0 \\ \hline(277,375) & (288,925) & (292,600) & (858,900) & (311,325) & 0 \\ \hline 5,559,050 & 5,782,175 & 5,859,400 & 17,200,625 & 6,215,175 & 0 \\ \hline 277,952.50 & 289,108.75 & 292,970.00 & 860,031.25 & 310,758.75 & 0 \\ \hline \end{tabular} Total Direct Materials Purchase Cost \begin{tabular}{|c|c|c|c|} \hline 603,554.00 & 627,779.00 & 636,826.75 & 1,868,159.75 \\ \hline \hline & & Crossfooting check & 1,868,159.75 \\ \hline \end{tabular} Direct Labor Budget JanuaryFebruaryMarchQTR Direct Labor LB075 Batches of production (original) Batches of production (whole number) LB075 labor hours needed Direct labor cost-LB075 Direct Labor LH075 Direct Labor hours needed Direct labor cost LH075 \begin{tabular}{|c|r|r|c|} \hline 1,580 & 1,650 & 1,660 & 4,890 \\ \hline$23,700 & $24,750 & $24,900 & $73,350 \\ \hline \end{tabular} Total labor cost Cross footing check Manufacturing Overhead Budget Number of batches Total direct labor hours (LB075 and LH075) \begin{tabular}{|c|c|c|c|} \multicolumn{1}{l}{ January } & \multicolumn{1}{l}{ February } & \multicolumn{1}{l|}{ March } & \multicolumn{1}{l|}{ QTR } \\ \hline 317 & 330 & 334 & 982 \\ \hline 1,897 & 1,981 & 1,995 & 5,873 \\ \hline \end{tabular} Variable Overhead Batch-related variable overhead cost Direct labor hour-related variable overhead cost Total variable OH cost Fixed Overhead \begin{tabular}{|r|r|r|r|} \hline 40,000 & 40,000 & 40,000 & 120,000 \\ \hline 451,850 & 469,250 & 474,150 & 1,395,250 \\ \hline \hline \multicolumn{3}{|c|}{ Cross-footing } \\ & \multicolumn{1}{|c|}{1,395,250} \end{tabular} S. A Budget Revenue Fixed S\&A expenses Lockitt Inc., Budgeted Income Statement Quarter ended March 31 Revenue Cost of Goods Sold Gross Profit Selling and Admin Expense Income from operations before tax \begin{tabular}{|r|r|} \multicolumn{2}{|c|}{%} \\ \hline 4,303,200 & 100% \\ 3,351,850 & 78% \\ \hline 951,350 & 22% \\ 279,096 & 6% \\ \hline 672,254 & 16% \\ \hline \hline \end{tabular}