Kitchen Pro, Inc. has the following cost structure for two of its most popular products.

	Blender	Food processor
Direct material	$ 18	$ 33
Direct labor	12	27
Manufacturing overhead @$48 per machine hour	48	96
Cost if purchased from an outside supplier	60	114
Annual demand (Units)	20,000	28,000

Past experience has shown that the fixed manufacturing overhead component included in the manufacturing overhead cost (of $48 per hour) per machine hour averages $30. Management has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. (4 + 4 = 8 points)

a) Kitchen Pro has a constraint on machine capacity. If 50,000 machine hours are available and management wants to maximize profit, how many units of each product should the firm manufacture? How many units of each product should be purchased? Justify your answer with necessary calculations.

b) With all other things unchanged, if Kitchen Pro is able to reduce the direct material cost for the food processor to $18 per unit, how many units of each product should be manufactured? How many units of each product should be purchased? Justify your answer.