Benkhadour Co. manufactures four different products. Because the quality of its products is high, the demand for them is greater than the company can satisfy.

Based on the inquiries made by current and potential customers, you have estimated the following for the coming year:

Product

Estimated

Demand in Units

Selling Price

per Unit

Direct Materials

Cost per Unit

Direct Labour

Cost per Unit

A

8,000

$50

$5

$5

B

24,000

60

10

9

C

20,000

150

25

30

D

30,000

100

15

20

The following information is also available:

• 1.The direct labour rate is $15 per hour and the factory has a capacity of 80,000 hours. For the next year, Benkhadour is unable to expand this capacity.
• 2.Benkhadour is unwilling to increase its selling prices.
• 3.Apart from direct materials and direct labour, the only other variable expense is variable overhead. The variable overhead is 50% of the direct labour cost.
• 4.Fixed manufacturing overhead is estimated to be $1 million for the coming year. Fixed marketing and administrative expenses are estimated to be $750,000 for the coming year.

Instructions

Determine which products and how many units of each Benkhadour should produce in the coming year in order to maximize its operating income.

Produce 11,467 units of C