Chimwendo manufactures three components, A, A, and T using the same machine for each. The budget for
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Question:
Chimwendo manufactures three components, A, A, and T using the same machine for each. The budget for the next year calls for the production and assembly of 4 00 of each component. The variable cost per unit of the final product is as follows: Machine hours Variable cost ($) 1 Unit of S 3 20 1 Unit of A 2 36 1 Unit of T 4 24 Assembly 20 100 Only 24 000 hours of machine time will be available during the year and a sub-contractor has quoted the following unit prices for supplying components. S = $29 A = $40 T = $34
Required
(i) Calculate which components Chimwendo should manufacture and which should be supplied by the sub-contractor and the total cost components in that choice
(ii) Advise the management of Chimwendo of your decision.
Expert Answer:
Step 1 A variable cost is a commercial expense that changes with the quantity of product or service ... View the full answer
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