accounting 350 458711

Management believes 6,000 WVD drums could be sold each year if the company had suffi –

cient 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 4,000 WVD-type drums per year at a price

of $138 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 0.5 hours

of welding time per frame and yet sell for far more than the drums. Megan believes that TufStuff

could sell up to 1,600 bike frames per year to bike manufacturers at a price of $239 each. The accounting

department has provided the following data concerning the proposed new product: