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A company manufactures four components (L, M, N and P) which are incorporated into different products. All the components are manufactured using the same general

A company manufactures four components (L, M, N and P) which are

incorporated into different products. All the components are

manufactured using the same general purpose machinery. The following

production cost and machine hour data are available, together with the

purchase prices from an outside supplier.

Production cost:

L

N

M

P

$

$

$

$

Direct material

12

18

15

8

Direct labour

25

15

10

8

Variable overhead

8

7

5

4

Fixed overhead

10

6

4

3

Total

55

46

34

23

Purchase price from outside supplier

57

55

54

50

Hours

Hours

Hours

Hours

Machine hours per unit

3

5

4

6

Manufacturing requirements show a need for 1,500 units of each component per week. The maximum number of general purpose machinery hours available per week is 24,000

What number of units should be purchased from the outside supplier?

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