Question
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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