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M17 11.5 Make or Buy-Time Limitation A Company manufactures three components. A, B and C. These components pass through Machines P and Q. The Machine Hour capacity of Q is limited to 7,800 hours a month. The Company is interested in fulfilling the market demand to retain its market share. The following information is given: Components A B C Demand (units / month) 1,200 1,200 1,500 Variable Cost per unit 187 215 111 Fixed Cost (at normal capacity utilization) 115 * 115 55 Hours Per unit: P 2 2 17 3 3 1 Component B has to be made by the Company. There is a Supplier available for Components A and C at * 280 and * 161 per unit respectively. 1. Which Component(s) and in what quantities should be purchased to minimize costs? 2. From a financial perspective, what do you need to ensure in order to justify your answer in (1) above? a