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  • 1.  Part 2, Time constraint query.

    Posted 12-02-2022 01:24 PM

    Hello Folks! Please help me with this concept.


    Synergy Inc. produces a component that is popular in many refrigeration systems. Data on three of the five different models of this component are as follows.

     

    Model

     A B C 
    Volume needed (units)5,0006,0003,000
    Manufacturing costs   
    Variable direct costs$10$24$20
    Variable overhead51015
    Fixed overhead112017
    Total manufacturing costs$26$54$52
    Cost if purchased$21$42$39 

     

     

    Synergy applies variable overhead on the basis of machine hours at the rate of $2.50 per hour. Models A and B are manufactured in the Freezer Department, which has a capacity of 28,000 machine processing hours. Which one of the following options should be recommended to Synergy's management?

    A.

    Purchase all three products in the quantities required

    B.

    Manufacture all three products in the quantities required.

    C.

    The Freezer Department's manufacturing plan should include 5,000 units of Model A and 4,500 units of Model B

    D.

    The Freezer Department's manufacturing plan should include 2,000 units of Model A and 6,000 units of Model B



  • 2.  RE: Part 2, Time constraint query.

    Posted 12-03-2022 02:45 AM
    Hi 
    Please see below a short solution to your query -:

                                                             A                  B                 C

    Cost of manufacturing                   15                 34                45

    Purchase from Market                   21                  42               39

    Net Saving                                     6                   8                  6

    Hours required to Produce            2                   4                  6

    Per Hour Saving                           3                    2                   1

    Ranking                                         I                    II                   III

    Productions in Units                     5000             4500          To be purchase from outside

    Hours consumed                          10000           18000

    Total Hour available                                28000 Hours            Limiting Factor


    So Ans is    5000 units of A and 45  units of B    

    Please ask if you need further clarifications

    Regards

    Sudhir

    ------------------------------
    SUDHIR LEVI
    Chief Financial Officer
    New Delhi
    India
    ------------------------------



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