The Badminton Company has 4,000 machine hours available annually to manufacture racquets. The following information is available for the two different racquets produced by Badminton: $\begin{array}{|l|r|}
\hline \text { Pro } & \
\hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 2,000 \text { units } \
\hline \text { Machine time } & \text { 1.50 hours per unit } \\hline \text { Mid } & \
\hline \text { Unit sales price } & \$ 150 \
\hline \text { Unit variable costs } & \$ 60 \\hline \text { Annual demand } & \underline{4,000 \text { units }} \
\hline \text { Machine time } & \underline{2 \text { hours per unit }} \
\hline
\end{array}$ How many units of each racquet should be manufactured for the company to maximize its operating income?

Question

The Badminton Company has 4,000 machine hours available annually to manufacture racquets. The following information is available for the two different racquets produced by Badminton: $\begin{array}{|l|r|}
\hline \text { Pro } & \
\hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 2,000 \text { units } \
\hline \text { Machine time } & \text { 1.50 hours per unit } \\hline \text { Mid } & \
\hline \text { Unit sales price } & \$ 150 \
\hline \text { Unit variable costs } & \$ 60 \\hline \text { Annual demand } & \underline{4,000 \text { units }} \
 \hline \text { Machine time } & \underline{2 \text { hours per unit }} \
\hline
\end{array}$ How many units of each racquet should be manufactured for the company to maximize its operating income?

Quizplus · Accepted Answer

To maximize operating income, prioritize the product with the highest contribution margin per machine hour. Pro racquets have a contribution margin of $100 per hour ($150/1.5 hours), while Mid racquets have $45 per hour ($90/2 hours). Produce 2,000 Pro units (3,000 hours) and use the remaining 1,000 hours for 500 Mid units.

The Badminton Company Has 4,000 Machine Hours Available Annually to Manufacture