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Delicious Sdn Bhd manufactures one product, a ready-made paste to be used in western cuisine, called Fabulous. The product is sold nationwide to various restaurants

Delicious Sdn Bhd manufactures one product, a ready-made paste to be used in western cuisine, called Fabulous. The product is sold nationwide to various restaurants and grocery markets. Temptation plans to sell a similar paste through its regional restaurant chain under its private label. Temptation has asked Delicious to submit a bid for a 25 000 kilogram order of the private brand paste. While the composition of the Temptation paste differs from that of Fabulous, the manufacturing process is very similar. The Temptation paste would be produced in 1000 kilogram batches. Each batch would require 60 direct labour hours and the following ingredients:

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Variable manufacturing overhead RM 4.50 per direct labour hour Fixed manufacturing overhead RM 7.50 per direct labour hour Combined rate RM12.00 per direct labour hourCa enne He-er \" The rst three ingredients [Cayenne pepper, lD'regano, Rosemary} are all used in the production of Fabulous. Thyme was used in a product that Delicious has discontinued. This ingredient was not soid or discarded because it is not perishable and Delicious has adequate storage facilities. Delicious could sell Thyme at the prevailing market price, less 20 cents per kilogram for selling and handling expenses. Delicious also has on hand ingredient, Chilli pepper, to be used in another product that is no longer produced. Chilii pepper, which cannot be used in Fabulous, can be substituted for Cayenne pepper on a oneforone basis without affecting the quality of the Temptation paste. The quantity of Chilli pepper in inventory has a salvage value of ammoa. Inventory and cost data for the ingredients that can be used to produce the Temptation paste are as follows: Raw material No. of kg in inventory Actual price per kg Current market when purchased [RM] price per kg {HM} ca enne weer \" Dre.ano \" Rosemar Thyme mm .9. .Er * salvage value of RMiDD for entire inventory on hand

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