Reference no: EM132507962

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:

Question 1: How much of each product should Wellington produce each month while the shortage lasts? Explain.