1. ABC limited produces 3 products X, Y and Z. The following information is available. It uses one type of material Alpha to produce all the three products.

Product X Y Z

Demand (units) 3,000 2,500 2,000

Variable cost to make ($ per unit) 14 15 11

Buy-in price ($ per unit) 13 18 12

Kg of Alpha required per unit 1kg 1.5kg 2kg

(Included in variable cost)

Required:

1. The availability of Material Alpha is limited to 7000 kg. Based on the available material suggest if the material is sufficient to produce all the products. (Calculate surplus or shortfall.) (2 Marks)
2. Explain problems involving capacity utilization in make or buy decisions. Support your answer based on the calculation done in part(b) above. (4 marks )