EXERCISE 1: PRICING Abu Manufacturing sdn. Bhd. has 3 product A, B and C. Currently sales cost and the selling price details, and processing time requirements are as follows: PRODUCT C Annual Sales (units) Selling Price (RM) Unit cost (RM) Processing time Required per unit (hours) PRODUCT A 6000 20.00 18.00 PRODUCT B 6000 31.00 24.00 750 39.00 30.00 1 1 2 The firm is working at fully capacity (13500 processing hours per year). Fixed manufacturing overheads are absorbed into unit costs by a charge of 200% of variable cost. This procedure fully absorbs the fixed manufacturing overhead. Assuming that The selling price is not altered. Processing time can be switched from one product line to another. The demand at current selling prices is: PRODUCT A 11000 PRODUCT B 8000 PRODUCT C 2000 You are required: a) To calculate the best production program or the next operating period and to indicate the increase in net profit that this should yield. (10 marks) b) Identify the opportunity cost. (1 mark)