the Leastern Company- Required A, B, C, D, E

The Leasten Company has one machine on which it can produce either of the two products, Uno and Duo. Sales demand for both products is such that the machine could operate at full capacity on either one of the products and Leasten can sell all of the output at current prices. The requirement of machine time and cost and price data for both products are given below: Per unit of production Uno Duo Selling price $60 $110 Direct materials cost $8 $9 Direct labor cost $3 $5 Cost of Machine Depreciation $15 $30 Allocated factory fixed costs excluding depreciation $9 $15 Total production cost $59 Gross margin per unit $25 $51 Variable selling and administration cost $1 $2 Net profit before fixed SG&A cost $24 $49 $35 Machine depreciation cost is allocated based on machine hours @ a rate of bother fixed factory costs are allocated based on DL costs @ a rate of $5.00 $3.00 per hour per dollar of DL cost Required: a) Fixed selling and administration costs are the same for both Uno and Duo. Which product should Leasten manufacture and why? b) Assume that the demand for Uno and Duo and the production capacity of the machine are as given below for the rest of the problem Uno Duo Demand in units per month 1,000 2,000 Available machine capacity per month 11,400 hours Find out how many units of Uno and Duo should be manufactured per month. c) Based on your answer for part (b), what is the opportunity cost of not having enough machine capacity per month? d) Suppose the company has a policy of meeting ALL of the market demand irrespective of constratints. Company can outsource the production to an outside vendor and get either Uno or Duo supplied at short notice. The following purchase prices for Uno and Duo are applicable for outsourcing. Uno Duo Purchase price from outside vendor $50 $100 How many units of Uno and Duo should be manufactured in house per month? How many units of Uno and Duo should be outsourced per month? e) Based on your answer for part (d), what is the opportunity cost of not having enough machine capacity to produce all the units demanded by the market? ALTIC Minn