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Problem 2: Second Skin, Inc, makes three different varieties of soothing lotions, Lemon, Mint, and Violet. Unit data for the three products follows: Lemon Mint
Problem 2: Second Skin, Inc, makes three different varieties of soothing lotions, | |||||||
Lemon, Mint, and Violet. Unit data for the three products follows: | |||||||
Lemon | Mint | Violet | |||||
Sales price, per 12-oz bottle | $28.00 | $35.00 | $42.00 | ||||
Variable costs, per 12-oz bottle | |||||||
Direct Materials | 7.50 | 4.50 | 12.00 | ||||
Labor & Overhead | 13.50 | 20.00 | 14.00 | ||||
Quantity of TO per bottle (in oz) | 2.50 | 1.50 | 4.00 | ||||
All three products use a specially-developed aloe oil (AO). The demand for the | |||||||
products far exceeds the direct materials available to produce the products. AO costs | |||||||
$1.50 per ounce, and a maximum of 1,000 ounces is available each month. Second Skin must | |||||||
produce a minimum of 80 bottles of each product, due to contractual agreements. | |||||||
Required: | |||||||
(1) How many bottles of each product should Second Skin produce? Show your work to justify | |||||||
your answer! | |||||||
(2) What is the maximum amount Second Skin would be willing to pay for another 400 | |||||||
ounces of AO? |
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