Question
A Car manufacturing company needs four components W, X, Y and Z. The manufacturing Components may be procured from outside. The cost, purchase price for
A Car manufacturing company needs four components W, X, Y and Z. The manufacturing Components may be procured from outside. The cost, purchase price for the component and other information are given below:
W | X | Y | Z | |
TZS’000 | TZS’000 | TZS’000 | TZS’000 | |
Direct Material | 60 | 70 | 75 | 60 |
Direct wages | 30 | 40 | 60 | 40 |
Direct Expenses @ TZS. 20,000 per machine hour | 40 | 30 | 40 | 40 |
Fixed Cost | 20 | 20 | 15 | 25 |
150 | 160 | 190 | 165 | |
Purchase price from market | 150 | 160 | 200 | 135 |
Units required for the year | 3,000 | 3,500 | 2,000 | 3,000 |
There are constrains in machine time is manufacturing all components. Total machine hours available is only 12,000.
Other alternative is to use machine time in a second shift which will attract 20% extra wages and other fixed overheads @TZS. 3,000,000 for 1000 hours or part thereof.
Required: Give your suggestion about to course of action for maximization of profit.
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Management and Cost Accounting
Authors: Colin Drury
10th edition
1473748873, 9781473748910 , 1473748917, 978-1473748873
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