Question
Wow Chemical Canada Inc. produces three products at its plant in North San JoseAlpha, Beta, andGamma. Their selling prices and costs per barrel are as
Wow Chemical Canada Inc. produces three products at its plant in North San JoseAlpha, Beta, andGamma. Their selling prices and costs per barrel are as follows:
Alpha Beta Gamma
Selling price $ 116 $ 125 $ 160
Direct materia 32 40 38
Direct labour (@ $20 per hour) 20 30 40
Variable overhead 16 23 32 Variable selling 2 2 3 Total variable costs 70 95 113 Fixed overhead * 13.50 20.25 27 The plants total fixed costs are $1,632,000 per year (i.e., the fixed overhead of $1,215,000 plusplant-specific fixed selling and administrative costs of $417,000).
The marketing department forecasts that, next year, the plant could sell a maximum of 50,000 barrelsof each product. The plants constrained resource is direct labor hours. Practical capacity is 90,000direct-labor hours per year Determine the optimal sales mix: How many barrels of each productshould the plant produce to maximize its profit? [Show all necessary calculations.]
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