Bhagya Ltd is producing a software equipment from fi ve components, three of which are made by using generalpurpose machines and two by manual labour. The data for the manufacture of the equipment are as follows:

Required:

(a) Profi t made by the company from the current operations.

(b) If the company buys any one of the components A, B or C, what is the extent of additional capacity that can be created?

(c) Assuming a 50% increase in demand during the next period, which component should be bought from the market?

(d) The increase in profi t, if any, if the component suggested in C is purchased from the market.

(e) Which component should be purchased and in what quantity if production is increased by 55%?

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Components A B C D LLI E Total Machine hours required per unit Labour hours required per unit 20 28 24 - 72 - - - 4 2 6 Variable cost per unit Rs. Rs. Rs. Rs. Rs. Rs. 32 54 58 12 4 160 Fixed cost per unit (apportioned) 48 102 116 24 26 316 Total component cost 80 156 174 36 30 476 Assembly cost/unit (All variable) 40 Selling price/unit 600 The marketing department of the company anticipates a 45% increase in demand during the next period. Gen- eral-purpose machinery used to manufacture A, B and C which are already working to the maximum capacity of 9,504 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 the demand. The management is considering the purchase of 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: Rs. Component A 100 Component B 300 Component C 200