Question

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?

Answer 1

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