Product LM can be produced by machine A or machine B. Machine A can produce 15 units of LM per hour and B takes 25 units per hour. The total machine hours available are 7,500 hours per annum. From the following comparative costs and selling price, you are required to determine the profitable method of manufacture:
|
Per Unit of Machine A Rs. |
Product LM – Machine B Rs. |
|
|
Direct materials |
30 |
30 |
|
Direct labour |
15 |
20 |
|
Overhead: |
||
|
Variable |
17 |
22 |
|
Fixed |
8 |
8 |
|
Total costs |
70 |
80 |
|
Selling price |
75 |
75 |