WVD dram whettier mate of putchased and would be $270 pet bke thatie All of the company's employees-direct and indirect-are paid for full 4000 hour work weeks and the company has a poicy of laying oft workers. only in major recessions. As soon as your analysis was shown to the top management team at TurStuit, several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued that direct laboc is always treated as a varable cost in textbooks and in practice and has always been conisidered a variable cost at Turstuit. After all, "direct" means you can directly, trace the cost to products. "If direct labor is not a varable cost, what is" Another manager argued just as strenuously that direct labou should be considered a fixed cost a! TufStuit. No one had been laid off in over a decade, and for all practical parposes, everyone at the plant is on a monthly salary. Everyone classitied as direct labor warks a regilar 40,00 -hour workweek and overtime has not been necessary since the company adopted lean Production techniques. Whether the welding mach ine is used to make drums or frames? the total payroll would be exactly the same. There is enough slack, in the form of idle time, to acconmodate any increase in fotal direct fabor time that the bike frames would require. Required: 1. Would you be comtortable relying on the financial data provided by the accourting 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 iabor is a faed cost] 4. Assuming direct laboris a fixed cost a. Determine the mumber of WVD drums (f any) that should be purchased and the number or WVD drums andior bike tiames (ff any! that should be manufactured. b. What is the increase (decrease) in net operating income that would result from this plan over current cperations? 5 Compute the contribution margin per unit [assume direct labor is a variable cost] 6. Compute the contnbution margin per weiding hour. [assume direct labor is a variable cost] 7. Assuming direct labor ts a varisble cost a. Deternuine the number of WVD drums if any) that should be purchased and the number of WVD drums and or bke frames (f any) that should be manufoctured. b. What is the increase (decrease) in net operating income that would tesuit from this pian over current operations? WVD dram whettier mate of putchased and would be $270 pet bke thatie All of the company's employees-direct and indirect-are paid for full 4000 hour work weeks and the company has a poicy of laying oft workers. only in major recessions. As soon as your analysis was shown to the top management team at TurStuit, several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued that direct laboc is always treated as a varable cost in textbooks and in practice and has always been conisidered a variable cost at Turstuit. After all, "direct" means you can directly, trace the cost to products. "If direct labor is not a varable cost, what is" Another manager argued just as strenuously that direct labou should be considered a fixed cost a! TufStuit. No one had been laid off in over a decade, and for all practical parposes, everyone at the plant is on a monthly salary. Everyone classitied as direct labor warks a regilar 40,00 -hour workweek and overtime has not been necessary since the company adopted lean Production techniques. Whether the welding mach ine is used to make drums or frames? the total payroll would be exactly the same. There is enough slack, in the form of idle time, to acconmodate any increase in fotal direct fabor time that the bike frames would require. Required: 1. Would you be comtortable relying on the financial data provided by the accourting 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 iabor is a faed cost] 4. Assuming direct laboris a fixed cost a. Determine the mumber of WVD drums (f any) that should be purchased and the number or WVD drums andior bike tiames (ff any! that should be manufactured. b. What is the increase (decrease) in net operating income that would result from this plan over current cperations? 5 Compute the contribution margin per unit [assume direct labor is a variable cost] 6. Compute the contnbution margin per weiding hour. [assume direct labor is a variable cost] 7. Assuming direct labor ts a varisble cost a. Deternuine the number of WVD drums if any) that should be purchased and the number of WVD drums and or bke frames (f any) that should be manufoctured. b. What is the increase (decrease) in net operating income that would tesuit from this pian over current operations
