Medi Pharma Company produces two products Mask and PPE kit (both are in high demand due to covid19). The cost structure of these two products are as follows: Mask $ PPE-kit $ Selling Price per unit 100 70 Variable cost 60 40 Contribution per unit 40 30 Both the products need services of lab experts with special skills. Only six experts are available with the company each working a 35 hours week (total 210 hours in total). The production of Mask need 30 minutes (0.5 hours) of experts’ time and PPE-kit needs 20 minutes (0.33 hours) My questions are: 1) When there a a scarce resource, we undertake the activity that has the highest contribution per unit of scarce resource. Do you agree? Explain your point using the data of Medi Pharma 2) Smart auto garage bought a machine three years ago for $ 12000. The future of this machine is uncertain and considering the replacement as it has no disposable value. Can $12000 be a relevant cost in making decision of replacing it? 3) Smart auto garage has stock of auto part code 69 that was bought at $ 5.00 each a month ago. You have to answer if it is a historical cost, past cost or sunk cost or all the three. Substantiate your answer with the definitions of all the three
Medi Pharma Company produces two products Mask and PPE kit (both are in high
demand due to covid19). The cost structure of these two products are as follows:
| Mask $ | PPE-kit $ | |
| Selling Price per unit | 100 | 70 |
| Variable cost | 60 | 40 |
| Contribution per unit | 40 | 30 |
Both the products need services of lab experts with special skills. Only six experts are available with the company each working a 35 hours week (total 210 hours in total). The production of Mask need 30 minutes (0.5 hours) of experts’ time and PPE-kit needs 20 minutes (0.33 hours)
My questions are:
1) When there a a scarce resource, we undertake the activity that has the highest contribution per unit of scarce resource. Do you agree? Explain your point using the data of Medi Pharma
2) Smart auto garage bought a machine three years ago for $ 12000. The future of this machine is uncertain and considering the replacement as it has no disposable value. Can $12000 be a relevant cost in making decision of replacing it?
3) Smart auto garage has stock of auto part code 69 that was bought at $ 5.00 each a month ago. You have to answer if it is a historical cost, past cost or sunk cost or all the three. Substantiate your answer with the definitions of all the three
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