Scenario for parts (a) and (b) Company WX manufactures a number of finished products and two components. Three finished products (P1, P2, and P3) and two components (C1 and C2) are made using the same resources (but in different quantities). The components are used internally by the company when producing other products but they are not used in the manufacture of P1, P2 or P3.Budgeted data for December for P1, P2, P3, C1 and C2 are as follows:

Further information for December:Direct labour: 4300 hours are available.Direct material: 420kgs are available.Machine hours: no restrictions apply.Components: C1 and C2 are readily available from external suppliers for $50 and $80 per unit respectively. The external suppliers are reliable and the quality of the components is similar to that of those manufactured by the company.

Required:(a) Produce calculations to determine the optimal production plan for P1, P2, P3, C1 and C2 during December. It is not possible to produce partly finished units or to hold inventory of any of these products or components.

(b) There is a possibility that more of the direct material may become available during December. The shadow price per kg of the direct material has been calculated to be $200, $187.50 and $175 depending on how much extra becomes available.Explain the shadow prices of $200, $187.50 and $175 for the direct material. Your answer should show the changes to the resource usage and the production plan for each of the shadow prices.Scenario for parts [c] and (d) Company YZ manufactures products L, M and N. These products are always sold in the rate 9L: 6M: 5N. The budgeted sales volume for December is a total of 14 000 units. The budgeted sales volumes, selling price per unit and variable cost per unit for each of the products are shown below:

The budgeted fixed costs of the company for December are $2.7 million.(c) Calculate the number of units of each product that must be sold for Company YZ to break even in December given the current sales mix ratio.(d) The sales manager has now said that to be able to sell 6300 units of product L in December it will be necessary to reduce the selling price of product L.Calculate the sensitivity of Company YZ?s total budgeted profit for December to a change in the selling price per unit of product L.

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C2 P1 P2 РЗ C1 500 400 600 250 150 $/unit $/unit $/unit $/unit $/unit Units demanded 155 Selling price Direct labour ($10 hour) Direct material ($50/kg) Variable production overhead ($40 machine hour) Fixed production overhead ($20/labour hour) Gross profit 125 175 25 15 30 10 15 10 20 20 5 10 15 10 20 10 20 50 60 20 30 60 45 45 Sales budget (units) 3500 6300 4200 Selling price per unit Variable cost per unit 300 600 230 100 300 50 50 %24 %24