5. RELEVANT COSTS F OR DE CISION-MKING Mockery Ltd manufactures two products, both of which are produced with the same raw material, a precious metal. The anticipated price and cost per unit for the products in the next year are as follows: Product X Product Y Particulars Per unit Particulars Per unit Price $195.00 $206.00 Variable manufacturing cost Raw materials $9 x 6 kg $54.00 $9 x 5 kg $45.00 $14 x 2 hrs $28.00 $14 x 3 hrs $42.00 Direct labour $10.50x2hrs $21.00 $10.50x3 hrs $31.50 Variable overhead Fixed manufacturing overhead $25.00 $37.50 Variable selling cost $11.00 $1 1.00 Fixed administrative cost $12.00 $12.00 Total cost $151.00 $179.00 Test 2018 REQUIRED: a. Mockery Ltd plans to produce 24 000 units of Product X and 31 000 units of Product Y in the next year. The company believes there is growing demand for its products and therefore all of the units produced can be sold. However, the company can only purchase 200 000 kilograms at $9.00 per kg of the precious metal because of a civil war in the country in which the majority of the precious metal is mined. Calculate (i) how many units of Product X and Y should be produced given the constraint, and (ii) the operating income for the whole company. Assume that none of the xed costs are avoidable if either or both products are not produced. Show your workings. (6 marks) Mockery Ltd can purchase an additional 100 000 kilograms of the precious metal for $15 per kg. Should the additional kilograms be purchased? Explain your answer and show your workings. (3 marks) Mockery Ltd could outsource production of Product X for $164 per unit and Product Y for $175 per unit. Assuming that additional precious metal cannot be purchased (as in part (b)), how many units of Product X and Y should be outsourced? Explain your answer and show your workings. (2 marks) Identify three other factors (other than the change in operating income) that Mockery Ltd should take into account when deciding whether to outsource some production. (3 marks) TOTAL: 14 MARKS