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Business
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| Number of pages / Number of words: |
3 / 704 |
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of drums that can be produced 2,500
Contribution margin per manufactured drum $ 103.10
Contribution margin from manufactured drums $ 257,750
No. of drums to be purchased 500
Contribution margin per purchased drum $ 33.15
Contribution margin from purchased drums $ 16,575
Total Contribution Margin $ 274,325
Make Drums $257,750
Buy Drums $ 16,575
Make Bike Frames $ -
$274,325
Contribution Margin @ Status quo 257,750
Increase in Contribution Margin $ 16,575
5...
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The Case clearly indicates that the direct labor should be treated labor should be treated as a Fixed Cost. The company does not need any additional equipment and staff. Also the all the company's employees ? direct and indirect ? are paid for full 40-hour workweeks. Also the data provided by the accounting department is quite useless in making this decision...
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