Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.

Direct material	$	26			$	45
Direct labor		20				33
Manufacturing overhead @ $54 per machine hour		54				108
Cost if purchased from an outside supplier		68				116
Annual demand (units)		28,000				34,000

Past experience has shown that the fixed manufacturing overhead component included in the cost per machine hour averages $42. Kitchen Magicians management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers.

Required:

If 60,000 machine hours are available, and management desires to follow an optimal strategy, how many units of each product should the firm manufacture? How many units of each product should be purchased?

	Blender	Electric Mixer
Manufacture	28,000	16,000
Purchase

With all other things constant, if management is able to reduce the direct material for an electric mixer to $26 per unit, how many units of each product should be manufactured? Purchased?

	Blender	Electric Mixer
Manufacture
Purchase	28,000