Company Alpha (a) Company Alpha manufactures four liquids: A, B, C and D. The selling price and unit cost details for these products are as follows: Liquid A Liquid B Liquid C Liquid D Selling price $ per litre 100 $ per litre 110 $ per litre 120 $ per litre 120 Costs: Direct materials 24 30 16 21 Direct labour (6/hour) 18 15 24 27 Direct expenses 0 0 3 0 Variable overhead 12 10 16 18 Fixed overhead (note 1) 24 20 32 36 Total cost per litre 78 75 91 102 Profit per litre 22 35 29 18 Note 1 Fixed overhead is absorbed on the basis of labour hours, based on a budget of 1,600 hours per quarter (three months). During the next three months the number of direct labour hours is expected to be limited to 1,345 hours. The same labour is used for all products. The marketing director has identified the maximum demand for each of the four products during the next three months as follows: Liquid A 200 litres Liquid B 150 litres Liquid C 100 litres Liquid D 120 litres No inventories are held at the beginning of the period that could be used to satisfy demand in the period. Required (i) Determine the number of litres of liquids A, B, C and D to be produced and sold in the next three months in order to maximise profits. (ii) Calculate the profit that this would yield. (c) Suppose that a contract has been made before the beginning of the period by Company Alpha and one of its customers, Company Y. Company Alpha has agreed to supply Company Y with supply 20 litres of each A, B, C and D during the three month period. This sales demand from Company Y is included in the demand levels shown above in part (a) of the question.