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The Foundational 15 (Algo) [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]

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Cane Company manufactures two products called Alpha and Beta that sell for $125 and $85, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 101,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

	Alpha	Beta
Direct materials	$ 30	$ 12
Direct labor	21	20
Variable manufacturing overhead	8	6
Traceable fixed manufacturing overhead	17	19
Variable selling expenses	13	9
Common fixed expenses	16	11
Total cost per unit	$ 105	$ 77

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.

Foundational 13-13 (Algo)

13. Assume that Canes customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the raw material available for production is limited to 161,000 pounds. How many units of each product should Cane produce to maximize its profits?