Question
Wellington, Inc. manufactures three related products in its Colorado Springs facility.Relevant data are given below. The key material in these products is teflonium, a rare
Wellington, Inc. manufactures three related products in its Colorado Springs facility.Relevant data are given below. The key material in these products is teflonium, a rare mineral of which there is currently a shortage.In the near future, only 23,000 pounds per month of teflonium will be available, at a price of $180/lb.
Product AProduct BProduct C
Selling price/unit$1,200$1,450$1,950
Cost/unit:
Teflonium 360540720
Other materials 100120100
Direct labor 90120110
Variable overhead 202020
Fixed OH (300% of DL) 270360330
Expected monthly demand is:A, 8,000 units; B, 4,000 units; C, 1,000 units.
Required:How much of each product should Wellington produce each month
while the shortage lasts?Explain.
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