Hodgeson Ltd makes a range of products, many of which require the use of components that are either bought from a sub-contractor or made by the business itself. Three of Hodgeson's products ('Premium', 'Basic' and 'Component LFC), whose production all require the same facilities, require the use of a raw material CR7'. CR7 is not used on any other of the business's products. The material is very difficult to work with and requires a high level of special skill. Both the material and appropriate skilled labour is in limited supply. All labour is employed by the business on long-term contracts, where workers are not laid off if there are surplus labour hours, so their costs are fixed for Hodgeson. The budgeted per-unit cost structures of the three products for the forthcoming year are as follows: Raw materials Variable overheads Labour Fixed overheads Premium 24 2 45 37 108 Basic 19 4. 26 19 68 Component LFC 16 2 37 29 84 Included in the raw material cost were the following amounts for CR7, which has a budgeted cost of 4 a gram: Premium 12 Basic 5 Component LFC 11 Included in the direct labour cost were the following amounts for the special skilled labour (who work on the CR7), which is paid 12 an hour. Premium Basic Component LFC 22 19 18 The Premium and Basic are completed products that are sold to external customers at budgeted unit prices of 180 and 110 respectively. CONTINUED Component LFC is used as a component in another of the business's products (the Luxury). The final selling price of each Luxury is 200 per unit, but further variable processing costs will be incurred. Hodgeson applies an internal transfer price for Component LFC of 90 per unit. The budgeted demand for the forthcoming year for the three products is: Premium Basic Component LFC units 600 500 350 The demand for each product is independent of that for the other two. The supply of CR7 during the forthcoming year is limited to 3,000 grams. The maximum available amount of the special skilled labour during the forthcoming year is 2,600 hours. You are Julie Chen, a recently qualified Management Accountant, and you have been asked by the board of directors to advise them with planning the future production of Hodgeson's three products. d) Determine: i. The maximum amount that Hodgeson should be prepared to pay for an additional hour of the special skilled labour, if it became available. ii. The maximum amount that Hodgeson should be prepared to pay for an extra gram of CR7, if it became available. (5 marks) e) Advise the directors on options Hodgeson might consider to improve its profitability in the future. (5 marks) Structure / Presentation: report format (8 marks)