The Badminton Company has 4000 machine hours available annually to manufacture racquets.The following information is available for the two different racquets produced by Badminton:
$$\begin{array} { | l | l | }
\hline \text { Pro } & \
\hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 1800 \text { units } \
\hline \text { Machine time } & 1.25 \text { hours per unit } \
\hline \text { Mid } & \
\hline \text { Unit sales price } & \$ 125 \
\hline \text { Unit variable costs } & \$ 80 \
\hline \text { Annual demand } & 5000 \text { units } \
\hline \text { Machine time } & 6 \text { hours per unit } \
\hline
\end{array}$$
How many units of each racquet should be manufactured for the company to maximise its operating profit?

Question

The Badminton Company has 4000 machine hours available annually to manufacture racquets.The following information is available for the two different racquets produced by Badminton:
$$\begin{array} { | l | l | } 
\hline \text { Pro } & \
 \hline \text { Unit sales price } & \$ 300 \
\hline \text { Unit variable costs } & \$ 150 \
\hline \text { Annual demand } & 1800 \text { units } \
\hline \text { Machine time } & 1.25 \text { hours per unit } \
\hline \text { Mid } & \
 \hline \text { Unit sales price } & \$ 125 \
\hline \text { Unit variable costs } & \$ 80 \
\hline \text { Annual demand } & 5000 \text { units } \
\hline \text { Machine time } & 6 \text { hours per unit } \
\hline
\end{array}$$
How many units of each racquet should be manufactured for the company to maximise its operating profit?

Quizplus · Accepted Answer

To maximize profit, prioritize the product with the highest contribution margin per machine hour. Pro racquets have a higher contribution margin per hour than Mid racquets. Produce 1800 Pro racquets (2250 hours) and use the remaining 1750 hours for 292 Mid racquets.

The Badminton Company Has 4000 Machine Hours Available Annually to Manufacture