Explain the term arbitrage:

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Chapter 7, Problem 10Q

To determine

Explain the term arbitrage:

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YY Ltd produces and sells home appliances. Its three products are Product A, Product B, and Product C, all of which use aluminium as an essential direct material. However, this month's aluminium supply is limited due to unexpected supply chain disruption. The cost of aluminium is $2.5 per kg, and a maximum of 5,000 kg is available this month. The company must produce a minimum of 300 units of each product in a month. Unit data for the three products are as follows. The unit fixed costs are allocated costs, so the total fixed costs remain the same regardless of the product mix. Q. Apply relevant costs and revenues to decide the optimal product mix, which will help the company maximise profit in the short run. Q. A customer approached the company and wanted to buy 600 units of Product D, a custom product. The unit data for Product D are as follows. To produce the order, the company needs to acquire a new machine at $20,000. What will be the optimal product mix? Explain.

I am trying to find the accurate solution to this general accounting problem with appropriate explanations.

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