Question
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?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started