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Richardson, Inc. manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below:

| Size | Small | Medium | Large |
|--------|-------|--------|-------|
| Unit selling price | $430 | $550 | $1,230 |
| Variable manufacturing costs | ($200) | ($320) | ($700) |
| Fixed manufacturing costs | ($50) | ($140) | ($240) |
| Fixed selling and administrative costs | ($90) | ($25) | ($130) |
| Unit profit | $90 | $65 | $160 |
| Demand in units | 170 | 130 | 170 |
| Machine-hours per unit | 70 | 40 | 170 |

The maximum machine-hours available are 6,200 per week. How many of each product should be produced per month using the short-run profit-maximizing strategy?

Answer :

Final answer:

To find the short-run profit-maximizing strategy, calculate the profit per machine hour for each product. Prioritize production of the product with the highest profit per machine hour, taking into account the maximum machine hours available per month and the demand for each product.

Explanation:

The short-run profit maximizing strategy for Richardson, Inc. is based on prioritizing the production of the products that provide the greatest contribution per limited resource, in this case, machine hours. First, calculate the profit per machine-hour for each appliance size. This is done by dividing the unit profit of each product by the machine-hours each unit requires. The small appliance ($90/70) gives about $1.29/MH, the medium appliance ($65/40) gives about $1.63/MH, and the large appliance ($160/170) gives about $0.94/MH. Given the maximum machine-hours of 6,200 per week which translates to 24,800 per month, the optimal strategy would focus on producing medium appliances first due to the highest profit per machine-hour, followed by small and large appliances. However, the specific number per month would also be constrained by the stated demand in units for each appliance size.

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