Portland Corp. manufactures and sells a single product called KLIP.

Annual production capacity is 100,000 machine hours. It takes one

machine hour to produce one unit of KLIP. Annual demand for KLIP

is 80,000 units and is not expected to change. The company can use its

manufacturing facilities to make a new product SNAP which will take

2 machine hours to produce one unit. The company estimates that the

annual demand for SNAP will be 40,000 units.

KLIP sells for $10 per unit and SNAP will sell for $16 per unit.

Annual cost and production data are as follows:

	KLIP	SNAP
Variable costs per unit:
Direct materials	$1.50	$2.50
Direct labour	$2.50	$4.00
Variable manufacturing overhead	$1.00	$1.20
Variable selling expenses	$2.00	$3.30

Fixed manufacturing overhead $100,000

Fixed selling expenses $50,000

Management has decided to manufacture both KLIP and SNAP.

Required:

Determine the product mix in units for KLIP and SNAP that will

maximize income.