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
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 A Product B Product C
Selling price/unit $1,200 $1,450 $1,950
Cost/unit:
Teflonium 360 540 720
Other materials 100 120 100
Direct labor 90 120 110
Variable overhead 20 20 20
Fixed OH (300% of DL) 270 360 330
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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