Question
Islander company produces three products, land, earth and fire. Land sells for $40, Earth for $80 and Fire for $60. Variable costs per product: Variable
Islander company produces three products, land, earth and fire. Land sells for $40, Earth for $80 and Fire for $60.
Variable costs per product:
Variable cost | Land | Earth | Fire |
Direct materials | $12 | $20 | $16 |
Direct labour | $3 | $15 | $20 |
Other variable | $19 | $25 | $14 |
All three products use same material, Planet. The demand for product far exceeds the direct material available to produce the products. Planet costs $4 per unit and a maximum of 4,000 units are available each month. Islander must produce a minimum of 250 of each product. How many units of Planet will Fire use to produce the required amount to maximum its operating margin?
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