X Ltd. supplies spare parts to an air craft company Y Ltd. The production capacity of X Ltd…. 1 answer below »
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X Ltd. supplies spare parts to an air craft company Y Ltd. The production capacity of X Ltd. facilitates production of any one spare part for a particular period of time. The following are the cost and other information for the production of the two different spare parts A and B: Per unit Part A Part B Alloy usage……………………………………… 1.6 kgs. 1.6 kgs. Machine Time: Machine A……………………..0.6 hrs. 0.25 hrs. Machine Time: Machine B……………………..0.5 hrs. 0.55 hrs. Target Price (` )……………………………….. 145 115 Total hours available:………………………….. Machine A 4,000 hours Machine B 4,500 hours Alloy available is 13,000 kg. @ ` 12.50 per kg. Variable overheads per machine hours:……. Machine A: ` 80 Machine B: ` 100 Required (i) Identify the spare part which will optimize contribution at the offered price. (ii) If Y Ltd. reduces target price by 10% and offers ` 60 per hour of un utilized machine hour, what will be the total contribution from the spare part identified above?
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