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Product details are as follows: Product P Q R S Selling price (/unit) 42.00 57.00 54.60 Material T1 (Kg/unit) 4 6 6 Material T2 (Kg/unit)

Product details are as follows:

Product P Q R S
Selling price (/unit) 42.00 57.00 54.60
Material T1 (Kg/unit) 4 6 6
Material T2 (Kg/unit) 4 4.4 3.2 6
Direct labour (hours/unit) 1.2 2.4 3 3.4
Variable production overheads (/unit) 2.20 2.60 2.20 2.80
Fixed production overheads (/unit) 3.00 3.20 3.40 2.80
Expected demand for next month (units) 1,900 2,000 1,800

Products P, Q and R are sold to customers, while Product S is a component used in the manufacture of the other products.

Material T1 is expected to be in short supply next month. The company has received a delivery of 22,000 kilos of T1 which is expected to be in stock at the start of next month.The company cannot get further supplies unless it pays a premium price. The normal market price for T1 is 2.50 per Kg.

T2 costs 3.00 per Kg and direct labour is paid 4.00 per hour.

Required: If they decide to buy extra stock of T1, what is the maximum price they should pay?

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