Company XYZ produces two components (M and N) and is planning the allocation of its available resources for the next period. 75 units of component M and 60 units of component N are required to be produced but machine hour capacity is restricted to a total of 300 hours. Any deficit of components produced in-house can be made up by the purchase of any quantity of either component from an outside supplier. The objective of company XYZ is to satisfy the requirement for components at minimum total cost. The following information is available concerning each component: Costs (per unit) M N Direct materials 6.20 8.70 Direct labour 5.10 7.50 Variable production overheads 1.20 1.30 Fixed production overheads 4.80 6.40 17.30 23.90 Machine hours (per unit) 2.00 3.00 Price from outside supplier (per unit) 18.50 25.90 Required: For the next period: (a) Calculate the variable costs of producing each component in-house. (b) Calculate the extra costs of buying-in each component. (c) Determine which component should have production priority. Show workings clearly and justify your conclusion. (d) Calculate the number of units of each component that should be manufactured by company XYZ. Company XYZ produces two components (M and N) and is planning the allocation of its available resources for the next period. 75 units of component M and 60 units of component N are required to be produced but machine hour capacity is restricted to a total of 300 hours. Any deficit of components produced in-house can be made up by the purchase of any quantity of either component from an outside supplier. The objective of company XYZ is to satisfy the requirement for components at minimum total cost. The following information is available concerning each component: Costs (per unit) M N Direct materials 6.20 8.70 Direct labour 5.10 7.50 Variable production overheads 1.20 1.30 Fixed production overheads 4.80 6.40 17.30 23.90 Machine hours (per unit) 2.00 3.00 Price from outside supplier (per unit) 18.50 25.90 Required: For the next period: (a) Calculate the variable costs of producing each component in-house. (b) Calculate the extra costs of buying-in each component. (c) Determine which component should have production priority. Show workings clearly and justify your conclusion. (d) Calculate the number of units of each component that should be manufactured by company XYZ