Cane Company manufactures two products called Alpha and Betathat sell for $155 and $115, respectively. Each product uses onlyone type of raw material that costs $6 per pound. The company hasthe capacity to annually produce 110,000 units of each product. Itsaverage cost per unit for each product at this level of activityare given below:
| Alpha | Beta |
| Direct materials | | $ | 24 | | | $ | 12 | |
| Direct labor | | | 23 | | | | 26 | |
| Variable manufacturing overhead | | | 22 | | | | 12 | |
| Traceable fixed manufacturing overhead | | | 23 | | | | 25 | |
| Variable selling expenses | | | 19 | | | | 15 | |
| Common fixed expenses | | | 22 | | | | 17 | |
| Total cost per unit | | $ | 133 | | | $ | 107 | |
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The company considers its traceable fixed manufacturing overheadto be avoidable, whereas its common fixed expenses are unavoidableand have been allocated to products based on sales dollars.
13. Assume that Cane’s customers would buy a maximum of 87,000units of Alpha and 67,000 units of Beta. Also assume that the rawmaterial available for production is limited to 168,000 pounds. Howmany units of each product should Cane produce to maximize itsprofits?
Alpha:
Beta:
