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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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