Makita Company manufactures a
fast-bonding glue in its Northwest plant. The company normally
produces and sells 48,000 gallons of the glue each month. This
glue, which is known as MJ-7, is used in the wood industry to
manufacture plywood. The selling price of MJ-7 is $36 per gallon,
variable costs are $20 per gallon, fixed manufacturing overhead
costs in the plant total $221,000 per month, and the fixed selling
costs total $320,000 per month.
Strikes in the mills that purchase
the bulk of the MJ-7 glue have caused Makita Company