1. Semiconductors (PS) is a small electronics company that manufactures tape recorders and radios. The per-unit labor costs, raw material costs, and selling price of each product are given in Table A. On December 1, 2002, PS has available raw material that is sufficient to manufacture 100 tape recorders and 100 radios. On the same date, the companys balance sheet is as shown in Table B, and PSs asset-liability ratio (called the current ratio) is 20,000/10,000 = 2.

PS must determine how many tape recorders and radios should be produced during December. Demand is large enough to ensure that all goods produced will be sold. All sales are on credit, however, and payment for goods produced in December will not be received until February 1, 2003. During December, PS will collect $2,000 in accounts receivable, and PS must pay off $1,000 of the outstanding loan and a monthly rent of $1,000. On January 1, 2003, ES will receive a shipment of raw material worth $2,000, which will be paid for on February 1, 2003. PSs management has decided that the cash balance on January 1, 2003, must be at least $4,000. Also, PSs bank requires that the current ratio at the beginning of January be at least 2. To maximize the contribution to profit from December product, (revenues to be received) (variable production costs), what should PS produce during December?

Cost Information for Semiconductors

	tape recorder	radio
selling price	$100	$95
labor cost	$50	$35
raw material cost	$30	$40

Balance Sheet for Semiconductors

	Assets	Liabilites
Cash	$10,000
Accounts Receivable	$3,000
inventory outstanding	$7,000
bank loak		$10,000