The Fred Willard Company manufactures three products, A, B, and C, all made from the same material. Although Fred Willard sells a lot of product, financially the company is struggling. Fred Willard currently allocates overhead based on direct labor hours. Information for the three products for the last year is as follows:

	A	B	C
Production and sales volumes	15,000	12,000	18,000
Selling price per unit	$7.50	$12.00	$13.00
Raw material usage (pounds) per unit	2	3	4
Direct labor hours per unit	.1	.15	.2
Machine hours per unit	.5	.7	.9
Number of production runs per annum	16	12	8
Number of purchase orders per annum	24	28	42
Number of deliveries to retailers per annum	48	30	62

The price for raw materials remained constant throughout the year at $1.20 per pound. Similarly, the direct labor cost was $14.80 per hour. The annual overhead costs were as follows:

	$
Machine set up costs	26,550
Machine running costs	66,400
Procurement costs	48,000
Delivery costs	54,320

Fred Willard has hired you, a financial analysis expert, to explain their financial struggles. What advice do you have for Fred Willard?