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B2. Tee Limited manufactures disposable surgical face masks for selling overseas. Each disposable face mask requires the use of a filter imported from India. Face
B2. Tee Limited manufactures disposable surgical face masks for selling overseas. Each disposable face mask requires the use of a filter imported from India. Face masks of two different sizes for kids and for adults are produced. The corresponding production data per box of 50 pieces of the face masks during the last quarter of 2020 are estimated as follows: Type I (Kids) $350 Type II (Adults) $480 Selling price ($/box) $105 $145 Variable costs ($/box) Unit contribution margin (UCM) ($/box) Filters required per box UCMK UCMA 0.65 m2 0.76 m2 Market demand per year (box) 100,000 250,000 Due to persistent widespread of coronavirus around the world, the maximum supply filters from India is only 225,000 m2 for the last quarter of 2020. Fixed production overheads for the same period are estimated to be $300,300. Required: (a) Determine the unit contribution margin, "UCMK" and "UCMA", of Type I (Kids) and Type II (Adults) face masks respectively. (4 marks) (6) Calculate the minimum size of filters (in m?) to be purchased from the supplier for production in order to satisfy the market demand of face masks. (5 marks) (c) In view of limited supply of filters, determine the order of priority in producing face masks. Hence, suggest the optimal production mix. (11 marks) (d) Instead of producing the face masks, Tee Limited receives an offer from a supplier to buy Type I (Kids) face masks at $100/box and Type II (Adults) face masks at $155/box in an bundle based on the production mix in part (C) above. Advise with calculations if Tee Limited should make or buy face masks for sale. (10 marks) (Total 30 marks)
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