Pantech Bhd.manufacturesthreecomponents, PTB2,PTC3 and PTD4, using the same machines for each

Thebudget for the next year calls for the production and assembly of 4,000 for each component.

The variable production cost per unit of the final product, the electronic connectors, is:

Machine hours

Variable cost

RM

1 unit of PTB23201 unit of PTC32361 unit of PTD4424Assembly20

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:

PTB2PTC3PTD4Price per unitRM29RM40RM34

Required:

1. Calculate the shortfall in machine hours if the company produces all the components.

Advice Pantech Bhd. on the cheapest production policy due to the shortfall in machine hours