(Allocation of scarce resources) Because the employees of one of the com¬ pany’s plants are on strike, the Elkhorn Digital plant is operating at peak ca¬ pacity. It makes two electronic products, MP3 players and PDAs. Presently, the company can sell as many of each product as can be made, but making a PDA takes twice as long in production labor time as an MP3 player. Elkhorn’s production capacity is only 120,000 labor hours per month. Data on each product follow:LO.1  

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Sales Variable costs Contribution margin Labor hours required MP3 players $ 36 (30) PDAs $ 64 (54) $ 6 $ 10 1 2 Fixed costs are $240,000 per month. a. How many of each product should Elkhorn make? Explain your answer. b. What qualitative factors would you consider in making this product mix decision?