subject
Business, 16.06.2020 20:57 jujurae03

TufStuff, 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 2,000 hours of welding time is available annually on the machine. Because each drum requires 0.8 hours of welding machine time, annual production is limited to 2,500 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: Selling price per drum $179.00
Cost per drum:
Direct materials $46.90
Direct labor ($18 per hour) 4.50
Manufacturing overhead 5.55
Selling and administrative expense 17.80 74.75
Margin per drum $104.25

Management believes 3,125 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, Inc., a supplier of quality products, would be able to provide up to 1,800 WVD-type drums per year at a price of $120 per drum, which TufStuff would resell to its customers at its normal selling price after appropriate relabeling.

Megan Flores, TufStuff’s production manager, has suggested that the company could make better use of the welding machine by manufacturing bike frames, which would require only 0.2 hours of welding machine time per frame and yet sell for far more than the drums. Megan believes that TufStuff could sell up to 3,100 bike frames per year to bike manufacturers at a price of $78 each. The accounting department has provided the following data concerning the proposed new product:

Selling price per frame $78.00
Cost per frame:
Direct materials $19.90
Direct labor ($18 per hour) 22.50
Manufacturing overhead 18.15
Selling and administrative expense 8.90 69.45
Margin per frame $8.55

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 variable. The variable manufacturing overhead has been estimated at $1.29 per WVD drum and $3.00 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 $1.09 per WVD drum whether made or purchased and would be $2.80 per bike frame.

All of the company’s employees—direct and indirect—are paid for full 40-hour workweeks and the company has a policy of laying off workers only in major recessions.

Required:
a. 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?
b. Compute the contribution margin per unit for [assume direct labor is a fixed cost]: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

ansver
Answers: 3

Another question on Business

question
Business, 22.06.2019 03:00
1) u.s. real gdp is substantially higher today than it was 60 years ago. what does this tell us, and what does it not tell us, about the well-being of u.s. residents? what are the limitations of the gdp as a measure of economic well-being? given the limitations, why is gdp usually regarded as the best single measure of a society’s economic well-being? 2) what is an intermediate good? how does an intermediate good differ from a final good? explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of gdp, but the value of intermediate goods produced and not sold is included directly as part of gdp.
Answers: 2
question
Business, 22.06.2019 09:40
Alpha industries is considering a project with an initial cost of $8 million. the project will produce cash inflows of $1.49 million per year for 8 years. the project has the same risk as the firm. the firm has a pretax cost of debt of 5.61 percent and a cost of equity of 11.27 percent. the debt–equity ratio is .60 and the tax rate is 35 percent. what is the net present value of the project?
Answers: 1
question
Business, 22.06.2019 11:30
Schonhardt corporation's relevant range of activity is 2,500 units to 5,500 units. when it produces and sells 4,000 units, its average costs per unit are as follows: averagecost per unitdirect materials $ 7.60direct labor $ 2.90variable manufacturing overhead $ 1.65fixed manufacturing overhead $ 2.90fixed selling expense $ 0.95fixed administrative expense $ 0.65sales commissions $ 0.75variable administrative expense $ 0.65if 4,500 units are produced, the total amount of fixed manufacturing cost incurred is closest to: multiple choicea $16,800b $11,400c $11,600d $15,400
Answers: 3
question
Business, 22.06.2019 15:30
For a firm that uses the weighted average method of process costing, which of the following must be true? (a) physical units can be greater than or less than equivalent units. (b) physical units must be equal to equivalent units. (c) equivalent units must be greater than or equal to physical units. (d) physical units must be greater than or equal to equivalent units.
Answers: 1
You know the right answer?
TufStuff, Inc., sells a wide range of drums, bins, boxes, and other containers that are used in the...
Questions
question
Social Studies, 30.09.2019 11:20
question
Mathematics, 30.09.2019 11:20