Smash Company has 4,000 machine hours available annually to manufacture badminton racquets.The following information is available for the two different racquets produced by Smash: $$\begin{array} { | l | r | }
\hline \text { Pro } & \
\hline \text { Unit sales price } & \$ 400 \
\hline \text { Unit variable costs } & \$ 100 \
\hline \text { Annual demand } & 2,000 \text { units } \
\hline \text { Machine time } & \text { 1.5 hours per unit } \
\hline \text { Mid } & \
\hline \text { Unit sales price } &\$100\
\hline \text { Unit variable costs } &\$70 \
\hline \text { Annual demand } &\text { 5,000 units }\
\hline& \text { 2 hours per unit } \
\hline
\end{array}$$ How many units of each racquet should be manufactured for the company to maximize its operating income?

Question

Smash Company has 4,000 machine hours available annually to manufacture badminton racquets.The following information is available for the two different racquets produced by Smash: $$\begin{array} { | l | r | } 
\hline \text { Pro } & \
 \hline \text { Unit sales price } & \$ 400 \
\hline \text { Unit variable costs } & \$ 100 \
\hline \text { Annual demand } & 2,000 \text { units } \
\hline \text { Machine time } & \text { 1.5 hours per unit } \ 
\hline \text { Mid } &  \
 \hline \text { Unit sales price } &\$100\
\hline \text { Unit variable costs } &\$70  \
\hline \text { Annual demand } &\text { 5,000 units }\
\hline& \text { 2 hours per unit } \
\hline
\end{array}$$ 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 $300 and require 1.5 hours, giving $200 per hour. Mid racquets have a contribution margin of $30 and require 2 hours, giving $15 per hour. Produce 2,000 Pro units (3,000 hours) and use the remaining 1,000 hours for 500 Mid units.

Smash Company Has 4,000 Machine Hours Available Annually to Manufacture