Smash Company has 4000 machine hours available annually to manufacture badminton racquets. The following information is available for the two different racquets produced by Smash: $\begin{array}{|l|r|}
\hline \text { Pro }\
\hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 1800 \text { units } \
\hline \text { Machine time } & 1.25 \text { hours per unit } \
\hline \text { Mid } & \
\hline \text { Unit sales price } &\$ 100\
\hline \text { Unit variable costs } & \$ 70 \
\hline \text { Annual demand }& 5000 \text { units } \
\hline\text { Machine time }& \text { 6 hours per unit }\
\hline
\end{array}$ How many units of each racquet should be manufactured for the company to maximize its operating income? (Round your answer to the nearest whole unit.)

Question

Smash Company has 4000 machine hours available annually to manufacture badminton racquets. The following information is available for the two different racquets produced by Smash: $\begin{array}{|l|r|}
\hline \text { Pro }\
\hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 1800 \text { units } \
\hline \text { Machine time } & 1.25 \text { hours per unit } \
\hline \text { Mid } &  \
\hline \text { Unit sales price } &\$ 100\
\hline \text { Unit variable costs } & \$ 70 \
\hline \text { Annual demand }& 5000 \text { units }  \
\hline\text { Machine time }& \text { 6 hours per unit }\
\hline
\end{array}$ How many units of each racquet should be manufactured for the company to maximize its operating income? (Round your answer to the nearest whole unit.)

Quizplus · Accepted Answer

To maximize operating income, Smash Company should first meet the demand for the Pro racquet due to its higher contribution margin per machine hour. The Pro racquet has a contribution margin of $150 per unit and requires 1.25 hours per unit, resulting in a contribution margin per machine hour of $120. The Mid racquet has a contribution margin of $30 per unit and requires 6 hours per unit, resulting in a contribution margin per machine hour of $5. Given the annual demand and machine time per unit, the company can produce 1800 units of Pro racquets using 2250 machine hours (1800 units * 1.25 hours/unit). This leaves 1750 machine hours available (4000 total hours - 2250 hours used for Pro racquets). With the Mid racquet requiring 6 hours per unit, the company can produce 292 units of Mid racquets (1750 hours available / 6 hours per unit), rounded to the nearest whole unit.

Smash Company Has 4000 Machine Hours Available Annually to Manufacture