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Rocket Company produces two products: Alpha and Beta. The following table provides information about the two products and budgeted sales for the upcoming year. Rocket
Rocket Company produces two products: Alpha and Beta. The following table provides information about the two products and budgeted sales for the upcoming year. Rocket Company keeps no finished inventory so production equals sales. Alpha Beta Total Maximum Unit Sales 160,000 130,000 290,000 Planned Unit Sales kin 140,000 110,000 250,000 Price per Unit $25.00 $40.00 Variable Cost per Unit $15.00 $25.00 Fixed Costs $2,000,000 Machine Capacity (minutes) 3,000,000 Machine Minutes per Unit 9 14 Bent Company has offered to produce either Alpha or Beta for Rocket Company. Bent Company is a reliable supplier and can offer a supply price for each product that is 160% of Rocket Company's variable cost. Because supplying Rocket Company would require that Bent Company adjust a production line, it is only willing to supply units of either Alpha or Beta. Should Rocket Company accept the offer to supply Alpha or Beta, and how many units should the company buy to maximize total income? What would be the expected total income? (1.5 marks)
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