90.2K

Verified Solution

Link Copied!

Illustration 56. Stirling Industries Ltd., manufactures a product 'Z by making and assembling three components A, B and C. The components are made in a machine shop using three identical machines each of which can make any of the three components. However the total capacity of the three machines is only 12,000 machine-hours per month and is just sufficient to meet the current demand. Labour for assembling is available according to requirements. Further details are given below: Components Machine-hours Variable cost Market price at which required per unit per unit the component can be purchased if required Rs. 48 Rs. 64 B 5 60 75 80 110 Assembling 30 (per unit of Z) per unit. Fixed costs per month amount to Rs. 50,000. Product Z' is sold at Rs. 300 From next month onwards the company expects the demand for Z to rise by 25%. As the machine capacity is limited, the company wants to meet the increase in demand by buying such numbers of A, B or C which is most profitable. 4 A 6 Your are asked to find out the following: (a) Current demand and profit made by the company. (h) Which component and how many units of the same should be bought from the market to meet the increase in demand ? (c) Profit made by the company if suggestion in (b) is accepted

Answer & Explanation Solved by verified expert

See Answer