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Sissy Manufacturing has assembled the following data relating to its most popular products: Blender Electric mixer Direct material $6 $11 Direct labour $4 $9 Manufacturing
Sissy Manufacturing has assembled the following data relating to its most popular products: Blender Electric mixer Direct material $6 $11 Direct labour $4 $9 Manufacturing overhead @$16 per machine hour $16 $32 Cost if purchased from an outside supplier $20 $38 Annual demand (units) 20,000 28,000 Past experience has shown that the fixed component included in the manufacturing overhead averages $10 per machine hour. Sissy has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Using the above information you are required to: a) Calculate the number of units of each product should the firm manufacture and the number of units of each product Sissy should purchase. Assuming Sissy has 50,000 machine hours available, and Sissy Manufacturing desires to follow an optimal strategy that maximise the total contribution. b) Calculate the number of units of each product should the firm manufacture and the number of units of each product Sissy should purchase, if the supplier of material is able to reduce the direct material required for an electric mixer to $6 per unit, with all other things remain unchanged. c) Describe the qualitative factor to be considered for an outsourcing decision
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