Smash Company Has 4000 Machine Hours Available Annually to Manufacture

question 27

Multiple Choice

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.)

• A) 1800 units of Pro and 1508 units of Mid
• B) 1800 units of Pro and 292 units of Mid
• C) 1800 units of Pro and 5000 units of Mid
• D) 5000 units of Mid and 292 units of Pro

---

Definitions:

AVC

An alternative term for Average Variable Cost, reflecting the variable costs incurred per unit of output.

Total Cost

The complete cost of production, including both fixed and variable costs associated with the production of a good or service.

Units of Variable

A concept in economics that refers to the variable elements of production, such as labor hours, materials, or energy consumed, which change with the level of output.

Price of Labor

The compensation paid to employees for their work or services, typically in the form of wages or salaries.