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

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Definitions:

Excess Capacity

The situation in which a company can produce more products or services than currently demanded by the market.

High Fixed Costs

A financial condition where a business or operation has a high proportion of expenses that do not vary with the volume of production or sales.

Low Variable Costs

Operating conditions where costs that vary with production levels, like materials and labor, are minimal.

Mass Customization

A production strategy that combines the efficiency of mass production with the customization typically offered by bespoke services.