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Question - The Wonder Company sells three products which can be sold in any combination so long as no more than 210,000 machine hours are used. All costs are variable (labor and materials) except for the rental cost of the production facility, which is P960,000 per year. The economic data for each product are as follows:
Product L
Product M
Product N
Selling price per unit
40
30
20
Variable cost per unit
22
18
12
Machine hours per unit
3 hours
4 hours
1 hours
Required -
1. In the absence of any market constraints, what is the most profitable combination of products, and what is the profit?
2. If the market for Product N is limited to 90,000 units, with no market limitation on the other products, how does this change the best product combination and the profit?
3. What is the best product combination (and the profit) if a shortage of materials for Product L limits the production of that product to 30,000 units, and there is still a market limit of 90,000 units of Product N?
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