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QUESTION 2: LIMITING FACTOR DECISION MAKING Melati Sinar Sdn. Bhd. manufactures small components to be incorporated into the super-sonic vehicle produced by a local manufacturer. It operates two divisions, Alpha and Beta were both labour and machine times are applied to the components as they pass through each division. The production manager is planning the production schedule for next month. He has been told that the company is currently facing labour shortages and some machines are in need of repairs, which restrict the overall running time in the production division. The data gathered on the availability of machine and labour time together with the machine hours and direct labour hours required per piece of the components is shown below: Divisions Alpha Beta Monthly capacity: Direct labour hours available Machine hours available 78,000 52,500 95,400 78,600 Direct labour hours required: Component X Component Y Component Z WN 1 2 3 3 3 2 Machine labour hours required: Component X Component Y Component Z 1 1 2 2 2 3 The unit of cost and price data for each component are as follows: Unit cost per piece: Direct material Direct labour Variable overhead Fixed overhead Variable selling expense Selling price Component Y Z RM RM RM 13.00 11.00 12.00 16.00 18.00 12.00 6.00 8.00 4.00 15.00 18.00 26.00 3.00 8.00 10.00 145.00 180.00 120.00 CONFIDENTIAL The local manufacturer usually receives a stable order of 3,200 units of car parts per month and is relying on several suppliers for the components used. The company is willing to accept any combination of components supplied by Melati Sinar Sdn. Bhd. The usage of components per car part is given below: Component X 2 pieces per unit of car part Component Y 5 pieces per unit of car part Component Z 4 pieces per unit of car part Required: a. Calculate the requirement for machine hours and direct labour hours to produce Components X, Y and Z and determine the limiting factor in each department. (20 marks) b. Prepare a schedule for Melati Sinar Sdn. Bhd. showing the: i. Best production plan of components by showing clearly the ranking schedule of each product ii. Profit statement for each product based on the best production plan (optimal mix). (30 marks) C. Explain TWO (2) alternatives that management might consider so it can supply its customers with all products they demand. Your answer must be based on the shortage indentified in b(i) above. (4 marks) d. Discuss THREE (3) qualitatives factors that Melati Sinar Sdn. Bhd. should consider in making its decision (6 marks) (Total: 60 marks)