Smash Company has 4 comma 000 machine hours available annually to manufacture badminton racquets. The following information is available for the two different racquets produced by Smash: Pro Unit sales price $ 500 Unit variable costs $ 125 Annual demand 2 comma 000 units Machine time 1 hours per unit Mid Unit sales price $ 125 Unit variable costs $ 80 Annual demand 6 comma 000 units Machine time 4 hours per unit 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.)

Pro = 2,000 units

Mid = 500 units

Explanation:

Step 1 Establish if we have a limiting factor in Production

Smash Company has 4,000 Machine Hours Available

Demand of Machine Hours:

Pro ( 2,000× 1 hr per unit)     = 2,000 hrs

Mid ( 6,000× 4hrs per unit)   = 24,000 hrs

Total                                        = 26,000 hrs

Machine Hours Required > Available Machine Hour

Therefore Machine Hours are a limiting factor !!

Step 2 Calculate the Contribution per unit of  limiting factor (machine hours) for each unit

Pro

Contribution = Sales-Variable Costs

                      = $ 500 - $ 125

                      = $ 375

Contribution per unit of limiting factor = Contribution per Unit / limiting factor required per unit

                                                                    = $ 375/ 1 hours

                                                                   =  $375

Mid

Contribution = Sales-Variable Costs

                      = $ 125 - $ 80

                      = $ 45

Contribution per unit of limiting factor = Contribution per Unit / limiting factor required per unit

                                                                    = $ 45 / 4 hours

                                                                   =  $ 11.25

Step 3 Rank the Products

1-Pro

2-Mid

Step 4 Determine mix

Utilization of Hours Available

Pro                                = 2,000 hrs

Mid (4,000 - 2,000)    = 2,000 hrs

Total Available Hours = 4,000 hrs

Product Mix is therefore :

Pro 2,000 /1 = 2,000

Mid 2,000 / 4 = 500

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough