QUESTION NO. 03: Short Term Decision Making (12 Marks A) A manufacturer of television sets is considering ways to increase the firm's plant capacity utilization because it has recently been operating at 70% of copocity. One proposal is to make a component which is currently being purchased for $75 per unit. Based on a study by the firm's controller, the cost to produce the component is as follows: Direct materids Direct lobor(3 hours@ $11. 20 per hr) Manufacturing overhead applied based on direct labor hrs) Total $24.00 33.60 24.00 $81. 60 The anticipated work activity for the year is 250.000 direct lobor hours. Fixed manufacturing overhead for the year is budgeted at $1.75 milion Required: You have been asked by the controller to determine if the component should be built internally or purchased. Calculate the per unit cost differential between making and buying the component. B) Sangdi Ltd makes two products, SS and TT. Variable cost per unit is as follows: TT Direct material Direct labour @ Rs. 18 per hour Variable overhead Total variable cost The seling price per unit is Rs. 84 for Ss and Rs. 66 for TT. During July 2001 the availcole direct labour is limited to 48,000 hours. Sales demand in July is expected to be 18,000 units for Ss and 30,000 units for TT. Fixed cost is Rs. 200, 000 per month SS Rs. 6 Rs. 36 Rs. 18 Rs. 18 Rs. 6 Rs. 48 Rs. 6 Rs. 48 Required: Calculate the utlization of labour and material by each product