National Business Machines Manufactures Two Models of Fax Machines: a and B

question 202

Multiple Choice

National Business Machines manufactures two models of fax machines: A and B. Each model A costs $125 to make, and each model B costs $150. The profits are $32 for each model A and $43 for each model B fax machine. The total number of fax machines demanded per month does not exceed 2,600 and the company has earmarked no more than $550,000/month for manufacturing costs. How many units of each model should National make each month in order to maximize its monthly profits? What is the optimal profit?

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Definitions:

Total Asset Turnover

A ratio that evaluates the effectiveness of a firm's utilization of its assets to produce sales income.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by its shareholders' equity.

Debt-to-equity Ratio

This ratio showcases the relative amounts of debt and shareholders' equity employed to support a company's asset investments.

Times Interest Earned Ratio

A financial ratio measuring a company's ability to meet its interest obligations based on current earnings, indicating financial stability.