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Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively. Each product uses only one type of raw material
Cane Company manufactures two products called Alpha and Beta that sell for $150 and $105, respectively. Each product uses only one type of raw material that costs $5 per pound. The company has the capacity to annually produce 107,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Alpha Beta Direct materials $ 39 $ 19 Direct labor 25 29 Variable manufacturing overhead 12 19 Traceable fixed manufacturing overhead 21 23 Variable selling expenses 17' 13 Common fixed expenses 20 15 Total cost per unit $ 125 $ 91 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 13. Assume that Cane's customers would buy a maximum of 85,000 units of Alpha and 65,000 units of Beta. Also assume that the raw material available for production is limited to 166,000 pounds. How many units of each product should Cane produce to maximize its profits
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