Compware Ltd makes three products, all of which use the same machine which is available for 30,000 hours per period.

The standard costs of the products per unit are as follows

Products

RST

Rs.RsRs.

Direct materials704080

Direct labour:

Machinist (Rs.12 per hour)483660

Assemblers (Rs.8 per hour)243240

Total variable cost142108180

Selling price per unit200158224

Maximum demand (units)150025004000

Fixed costs are budgeted at Rs.300,000 per period and is to be absorbed on the basis of machine hours.

Compware Ltd could buy in similar quality products at the following unit prices:

Rs.

Product R 175

Product S140

Product T200

Required:

(a)On the basis of present machine hours, decide on the product mix which will maximize profit for the next month and calculate the amount of this profit.

(b)Determine which product(s) and quantities (if any) should be bought externally.

What factors other than the buying price should the company take into consideration in a make or buy decision?