Converting the obsolete materials into a specialized product, which would require the foJJowing additional work and materials:

The conversion would produce 900 units of saleable product, and these could be sold for £300 per unit.
Material A is already in stock and is widely used within the firm. Although present stocks together with orders already planned will be sufficient to facilitate normal activity, any extra material used by adopting this alternative will necessitate such materials being replaced immediately. Material B is also In stock, but it is unlikely that any additional supplies can be obtained for some considerable time because of an industrial dispute. At the present time material B is normally used in the production of product Z, which seJJs at £390 per unit and incurs total variable cost (excluding material B) of £210 per unit. Each unit of product Z uses four units of material B.
The details of materials A and B are as follows:

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Material A Material B Direct labour: 5000 hours unskilled 600 units 1000 units 5000 hours semi-skilled 5000 hours highly skilled 15000 hours Extra selling and delivery expenses 27000 Extra advertising 18000