Last year AAC manufactured and sold $143,000$ kettles for $39Dh$ each, but each kettle

only costs $20\mathrm{.}57Dh.$ Look at the figures! The finished components for each kettle cost

just over $10\mathrm{.}50$ Dh$,$ AAC had to spend $100,000$ Dh on standard electrical parts for the

thermostats, wages costs were $1,128,000$ Dh $($including health insurance$),$ the plant

rent was $100,000Dh,$ heat and lighting in that draughty place were $17,000Dh$ and all

other general expenses were another $95,000$ Dh$.$ However, an outside supplier has

offered to provide the $143,000$ kettles at a cost of $$2,860,000.$

At the end of the year AAC had no inventory left in the warehouse; neither finished

products nor parts, nor raw materials. The president of AAC $($who also the managing

director and a partner$)$ looked at those numbers and said "let us party! We have made

a profit of $18\mathrm{.}43$ Dh per kettle$.$

The financial officer $($who is the other partner$)$ said: "don't forget all those people in

administration and sales. They cost $451,000Dh.($including advertising$).$ What about

those machines and equipment you had to buy. We have used the machines and

equipment, which cost one million Dirhams; so much that we would not even get

scrap value from them. They are worn out and worth nothing."

Instructions:

Based on the above information, answer the following:

$1-$ How much the variable cost for each kettle and what was the contribution

margin per kettle?

$2-$ What was the total cost of each kettle, the average net profit per kettle,

and net profit for the whole company for the year?

$3-$ Should Al Ain Manufacturing Company stop making the kettle and buy it

from an outside supplier? Explain your answer.

$4-$ Can we$,$ in real life, use this sort of product cost calculation in most

normal manufacturing companies? If not, why?