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3. A company is considering making a new product which requires several types of raw material and labour. Analyse the following cases and calculate relevant
3. A company is considering making a new product which requires several types of raw material and labour. Analyse the following cases and calculate relevant cost of material and labour. Support your analysis with clear arguments. Material Type Units in inventory Additional information Units required Material A Nil 100 Current purchase price is INR 10/unit. Material B 110 100 purchased for INR 13/unit Current purchase price is INR14 unit. The material has no use in the company other than for the project under consideration. Units in inventory can be sold for INR12/unit. Material c 120 50 purchased for INR 20/unit Current purchase price is INR 22/unit. The material is regularly used in current manufacturing operations. Labour Type Hours required Additional information Unskilled 10,000 Paid at INR 10 per hour and existing staff are fully utilised. The company will hire new staff to meet this additional demand. Semi-skilled 5,000 Paid at INR 20 per hour. These employees are difficult to recruit and the company retains a number of permanently employed staff, even if there is no work to do. There is currently 2,000 hours of idle time available and any additional hours would be fulfilled by temporary staff that would be paid at INR 15/hour. Skilled 2,000 Paid at INR 20 per hour. There is a severe shortage of employees with these skills and the only way that this labour can be provided for the new project would be for the company to move employees away from making Product X. A unit of Product X takes 4 hours to make and makes a contribution of INR 40/unit. (8 marks)
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