Question
Ahsan Inc. produces four products A, B, C and D in its factory. Per unit product costs are given below: A B C D Direct
Ahsan Inc. produces four products A, B, C and D in its factory. Per unit product costs are given below: A B C D Direct materials Rs.14.30 Rs.10.20 Rs.11.00 Direct labour 19.40 27.40 33.60 Rs.10.60 40.40 Variable manufacturing overhead 4.30 Fixed manufacturing overhead 2.70 2.60 3.20 26.50 34.80 26.60 37.20 Unit product cost Rs.64.50 Rs.75.10 Rs.73.80 Rs.91.40 Some further information in relation to the products is as follows: Cutting minutes per unit Selling price per unit A 3.80 B D 5.30 4.30 3.40 Variable selling cost per unit Demand in units per month Rs.76.10 Rs.2.20 4,000 Rs.93.50 Rs.1.20 4,000 Rs.94.00 Rs.104.20 Rs.3.30 Rs.1.60 3,000 2,000 It is considered that the Cutting machines are the constraint in the production facility. The total minutes available for Cutting on these machines are 53,600. Required a) If the company is to make the best use of the existing Cutting machine capacity, what is the rank order for the manufacturing of the products? (e.g. If you want to make 'A' first, its rank would be 1, others 2,3 and 4 in order of preference) [4 Marks] b) Up to how much should the company be willing to pay for one additional minute of Cutting machine time? (Round off to two decimal places) [2 Marks]
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