Reference no: EM13595186

Smithton, Inc. produces four types of computer chips. Two of these (W and X) are sold by the business. The others (Y and Z) are incorporated, as components, into another of the company's products. Computer chips Y and Z are not incorporated into either computer chip W or X. The four types of computer chips have the following costing (per unit):

                                      W       X     Y      Z
Variable materials        100     90   80    92
Variable labour              50      30   45    57
Other variable costs      34      10   12    17
Fixed costs                   25      18    34   13
Total Cost per unit      209    149  171  179

Selling price per unit    250     220

An outside supplier is willing and able to supply unlimited quantities of products Y and Z to the business at a cost of £209 per unit of computer chip Y and £196 per unit of computer chip Z.
Smithton, Inc. has estimated the demand for its computer chips for the upcoming year. For chips W and X, the following is the market demand; for chips Y and Z, the following represents demand from estimated production requirements:

Units
W 6,500
X 5,500
Y 3,700
Z 3,400

Also, production of the computer chips is completed with a specialized machine. Each chip requires the following time:
Hours per unit
W 0.6
X 0.5
Y 0.6
Z 0.2

The machine is expected to be available for a maximum of 6,000 hours. No other shortages of any other production factor are expected.
Question:
1. Complete the necessary calculations in order to determine which products the business should plan to make next year. You will need to state your suggestions and support them with the calculations and assumptions presented.