caam3781_2016_06_nor (1).pdf x + + CD Page view | A Read aloud | Add text Draw Highlight caam3781_2016_06_nor.pdf C aam3781_2015_06_sup.pdf caam3781_2014_06_suop.pdf File C:/Users/Loura%20lm bondi/Downloads/caam3781_2014_06_suop.pdf A II! 2 of 5 LOTUS CC is a manufacturing company with two factories. The company's West factory currently produces a number of products. Four of these products use differing quantities of the same resources. Details of these four products and their resource requirements are as follows: Question 1: 35 marks Erase " J K L M N$ N$ N$ N$ Selling price 56 40 78 96 Direct Labour 20 16 24 20 Direct Material A 6 0 9 Direct Material B 10 0 15 20 Variable Overhead: Labour related Variable Overhead: Machine related 1.25 1 1.5 1.25 1.25 2 0.75 1 Machine hours (per unit) 5 8 3 4 Maximum demand per month (Units) 1000 3500 2800 4500 Additional information a 6 0 i. ii. Currently LOTUS CC purchases a component P from an external supplier for $35 per component. A single unit of this component is used in producing N the company's only other product. Product N is produced in LOTUS CC's other factory and does not use any of the resources identified above. Product N currently yields a positive contribution. LOTUS CC could manufacture the component in its West factory, but to do so would require: 1 hour of direct labour, 0.5 machine hours, and 2 kgs of direct material B. LOTUS CC purchases 500 components per month. LOTUS CC could not produce the component in its other factory. The purchasing director has recently advised you that the availability of direct materials P m A 23C Clear * ENG 5:23 AM 07/06/2022 ||! caam3781_2016_06_nor (1).pdf x + + CD Page view | A Read aloud | [T) Add text Draw Highlight 2 caam3781_2016_06_nor.pdf C aam3781_2015_06_sup.pdf caam3781_2014_06_suop.pdf File C:/Users/Loura%20lm bondi/Downloads/caam3781_2014_06_suop.pdf 3 of 5 Erase " vi. The direct labour is paid N$ 8 per hour. vii. Direct Material - A costs N$ 3 per litre while the cost of direct material B is N$ 5 per kg. REQUIRED: Answer the following questions using CVP approach Requirement a) Determine the variable overhead rate per labour hour and per machine hour b) Determine which of the materials is/are a binding constraint. Marks 3 a Q 6 11 c) Calculate whether LOTUS CC should continue to purchase the component P or whether it should manufacture it internally during the next 10 months. 10 d) Prepare a statement to show the optimum monthly usage of the West factory's available resources. 6 0 e) Assuming no other changes, calculate the purchase price of the component P at which your advice in part (a) above would change. 3 f) Explain TWO non-financial factors that should be considered before deciding whether or not to manufacture the component internally. 2 DE 23C Clear * ENG 5:23 AM 07/06/2022