Sally and Robin (S&R) Company is a local manufacturer of crystal valves in Guangdong. It produces 3 types of products namely K596, CF23 and SJ778 for export. The finance department of S&R is preparing its budgets for the next period. The accountant does not think that the budget on variable cost should be revised. The following was the budget for last period. K596 CF23 SJ778 Standard cost RMB RMB RMB Chips (RMB1 per piece) 1 2 4 Metal 2 2 3 Plastics 1 3 5 Direct labour (RMB60 per hour) 2 3 2 Fixed production overhead 1 Variable distribution cost 1 1.5 1 1 1 The marketing department estimated that budgeted selling prices and market demands for the three products are as follows. Budgeted selling price ($) Budgeted market demand (units) K596 CF23 SJ778 10 20 30 5,000 4,000 1,000 The only supplier of chips, Enger Company, is a small manufacturer whose production capacity for next year is limited to 15,000 pieces. If S&R require chips through other suppliers, the price of chips will be RMB 3 per piece. Required a) Assume there is no inventory at the beginning of the period and S&R only purchase chips from Enger, calculate the production mix and the maximum profit of S&R. b) 1.Calculate the profit of S&R if it purchased the chips from other suppliers. 2.Advise whether S&R should produce product K596 according to the original budgeted marke t demand of 5,000 units.