H Ltd. is producing kitchen equipment from the five components three of which are made using general purpose machines and two by manual labour. The data for the manufacture of the equipment is as follows: Components A B C D E Total Machine hours required p.u 10 14 12 - - 36 Labour hours required p.u - - - 2 1 3 Variable cost per unit (In Rs.) 32 54 58 12 4 160 Fixed cost p.u (apportioned) 48 102 116 24 26 316 Total Components cost 80 156 174 36 30 476 Assembly cost per unit 40 Selling price 600 The marketing department of the company anticipates 50% increase in demand during the next period. General purpose machinery used to manufacture A, B and C is already working to the maximum capacity of 4,752 hours and there is no possibility of increasing this capacity during the next period. But labour is available for making components D and E and also for assembly according to demand. The management is considering the purchase of any one of the components A, B or C from the market to meet the increase in demand. These components are available in the market at the following prices: Component A - Rs.80, Component B - Rs. 160 and Component C - Rs. 125 Require: 

i. Profit made by the company from current operations. (5 Marks) 

ii. If the company buys any one of the components A,B and C. What is the extent of additional capacity that can be crated? (5 Marks) 

iii. Assuming 50% increase in demand during the next period, which components should the company buy from the market? Why? (5 Marks)

 iv. The increase in profit, if any (5 Marks)

Answer rating: 100% (QA)

Id be happy to help i Profit made by the company from current operations To calculate the profit we need to find the total revenue and total cost of t... View the full answer