Products

A B C
Selling price 84 56 70
Variable costs
Direct materials 24 15 9
Labor and other costs 28 27 40
Quantity of Alvera 8 lb. 5 lb. 3 lb.

Cost of Alver 3
Max quantity available 5000
Minimum of 200 product each

Part B

1000 of alvera will produce c 333.3333 units

SP 70 VC
23333.33
Remaing Balance 7000
Per unit cost of alvera 7

They can pay a maximum of 7 rs/kg of alvera in this situation there would be no profit no loss
 A B C
84 56 70
3 3 3
Cost of producing 1 unit 52 42 49
profit per unit 29 11 18
Quantiy of alvera used for 200 unit each 1600 1000 600
Left of alvera lbs 1800

To maximize profit Compnay should produce C as unit fetches more profit per alver used
Remaing 1800 lbs alvera used for C 600
Total unit produced
A 1600
B 1000
C 1200

49
16333.3333333333

situation there would be no profit no loss

 200 5800 2200 3600
For Each unit of alvera used profit obtained 3.625 2.2 6

per alver used

 Direct materials $ 5 Per Unit
Direct manufacturing labor $ 2.5 Per Unit
Variable manufacturing overhead $ 1.25 Per Unit
Inspection, setup, materials handling
Machine rent
Allocated fixed costs of plant administration
Total costs

Cost of outsourcing @9.25 370000

Difference from outsourcing and in house production -30000

Therefroe purchasing from outside will favourable

Part B

Differnce between SP and VC 3

unit produced 40000
Cost increased 100000
Profit increased 120000
Positive effect 20000

They should consider in house cylce upgrade

For 40000 Units 40000
$ 200000 5 200000
$ 100000 2.5 100000
$ 50000 1.25 50000
$ 4000 4000
$ 8000 8000
$ 50000 50000
$ 412000 412000

400000

In house in costly