Rama Ltd has operated successfully for many years manufacturing highly specialised components for the computer industry. However, the current Covid-19 pandemic has led to the company facing a shortage of one particular material. The Board of Directors are meeting to discuss this problem and you have been asked to prepare some working notes for the meeting. The budget for the forthcoming year shows the following situation:

budget C1 C2 C3 C4 demand (units) 350 150 50 200 per unit selling price $2,800 $2,400 $2,200 $2,600 material A (kilos) 8 8 6 10 other materials $80 $80 $60 $100 direct labour (hours) 60 50 $70 40 variable overheads $400 $420 $360 $380