$0\mathrm{.}71$

points some of it is variable. The variable manufacturing overhead is $$1\mathrm{.}35$ per WVD drum and $$1\mathrm{.}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 variable selling and administrative expenses amount to $$\mathrm{.}75$ per WVD drum whether made or purchased and would be $$2\mathrm{.}10$ per bike frame.

All of the company's employees$-$direct and indirect$-$are paid for full $40\mathrm{.}00-$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 TufStuff, several managers got into an argument concerning how direct labor costs should be treated when making this decision. One manager argued direct labor is always treated as a variable cost in textbooks and in practice and has always been considered a variable cost at TurStuff. Afer 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 direct labor should be considered a fixed cost at TurStuff. 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 $40\mathrm{.}00-$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 slack, in the form of idle time, to accommodate any increase in total direct labor time that the bike frames would require.

Required:

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?

Compute the contribution margin per unit. $($assume direct labor is a fixed cost$)$

Compute the contribution margin per welding hour. $($assume direct labor is a fixed cost$)$

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 resulting from this plan over current operations?

Compute the contribution margin per unit, $($assume direct labor is a variable cost$)$

Compute the contribution margin per welding hour. $($assume direct labor is a variable cost$)$

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 resulting from this plan over current operations?

Complete this question by entering your answers in the tabs below.Compute the contribution margin per welding hour. $($assume direct labor is a fixed cost$)$

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 resulting from this plan over current operations?

Compute the contribution margin per unit. $($assume direct labor is a variable cost$)$

Compute the contribution margin per welding hour. $($assume direct labor is a variable cost$)$

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 resulting from this plan over current operations?

Complete this question by entering your answers in the tabs below.

Req $1$

Req $2$

Req $3$

Req $4$A

Req $4B$

Req $5$

Req $6$

Req $7$ A

Assuming direct labor is a fixed cost, 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.

$\backslash$table$[[,$Purchased,"Manufactured$],[$WVD drums,$1,760,6,700],[$Bike frames,,$]]$

Previoustime that the bike frames would require.

Required:

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?

Compute the contribution margin per unit. $($assume direct labor is a fixed cost$)$

Compute the contribution margin per welding hour, $($assume direct labor is a fixed cost$)$

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 incre