Part (a) HH Corp manufactures and sells brushes and combs. The company can sell all of either product it can make. The following data are pertinent to each respective product: Brushes Combs Units of output per machine hour 8 20 Unit selling price $12.00 $4.00 Unit product cost: Direct material $1.00 $1.20 Direct labour $2.00 $0.10 Variable overhead $0.50 $0.03 Total fixed overhead is $380,000 The company has 40,000 machine hours available for production. Required: (1) Prepare a production plan. (2) Calculate Net Income for each sales mix provided below: a. 320,000 brushes and 0 combs b. 0 brushes and 800,000 combs c. 160,000 brushes and 600,000 combs d. 252,630 brushes and 252,630 combs (3) State what sales mix maximizes net income without violating the machine hours constraint. Page 2 of 6 Part (b) Ralph Mauren operates a woodworking shop that makes tables and chairs. He has 25 employees working 40 hours per week and he has 750 hours per week available in machine time. Ralph knows that he must make at least four chairs for every table. He has also determined the following additional requirements: Product Labour Hours Machine Hours Contribution Margin Table 5 2 $18 Chair 3 1 $4 Required: Write the objective function and constraints given the above information. Part (c) Tommys Company is working at full production capacity producing 10,000 units of a unique product, PTSD. Manufacturing costs per unit for PTSD are as follows: Direct materials $ 2 Direct manufacturing labour 3 Manufacturing overhead 5 $10 The unit manufacturing overhead cost is based on a variable cost per unit of $2 and fixed costs of $30,000 (at full capacity of 10,000 units). The nonmanufacturing costs, all variable, are $4 per unit, and the selling price is $20 per unit. A customer, Flounding Corporation, has asked Tommys to produce 2,000 units of a modification of PTSD to be called PTSI. PTSI would require the same manufacturing processes as PTSD. Flounding Corporating has offered to share equally the non-manufacturing costs with Tommys. PTSI will sell at $15 per unit. Required: (1) What is the opportunity cost to Tommys of producing the 2,000 units of PTSI, assuming that no overtime is worked? (2) The Winter Company has offered to produce the 2,000 units of PTSI for Tommys, so that Tommys can accept the Flounding offer. Winter would charge Tommys $14 per unit for the PTSI. Should Tommys accept the Winter Companys offer? (3) Suppose Tommys had been working at less than full capacity producing 8,000 units of PTSD at the time the PTSI offer was made. What is the minimum price Tommys should accept for PTSI under these conditions? Page 3 of 6 Part (d) The management of HPE Industries has been evaluating whether the company should continue manufacturing a component or purchase it from an external supplier. A $100 cost per component was determined as follows: Direct materials $ 15 Direct labour 40 Variable manufacturing overhead 10 Fixed manufacturing overhead 35 $100 HPE uses 4,000 components per year. After GG Corp submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is purchased from GG, HPEs unused production facilities could be leased to another company for $50,000 per year. Required: (1) Determine the unit cost to continue production of the component. (2) Should the company make or buy the component? State the total dollar difference in favour of that alternative. (3) Assume that HPE could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Determine now if the company should make or buy the component and state the total dollar difference in favour of that alternativ