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Zeta Company manufactures two products called Gamma and Deta that sell for $135 and $95, respectively. Each product uses only one type of raw material
Zeta Company manufactures two products called Gamma and Deta that sell for $135 and $95, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 105,000 units of each product. Its average cost per unit for each product at this level of activity are given below: Direct materials Direct labor Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Total cost per unit Gamma $ 30 23 10 19 15 18 $115 Delta $18 16 8 21 11 13 $87 The company considers its traceable fixed manufacturing overhead to be avoidable, Common fixed expenses are unavoidable and have been allocated to products based on sales dollars. Assume that Zeta's customers would buy a maximum of 83,000 units of Gamma and 63,000 units of Delta. Also assume that the company's raw material available for production is limited to 200,000 pounds. How many units of each product should Zeta produce to maximize its profits? Gamma Delta Units produced
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