Question

Santana Rey has found that Business Solutions’s line of computer desks and chairs has become very popular, and she is finding it hard to keep up with demand. She knows that she cannot fill all of her orders for both items, so she decides she must determine the optimal sales mix given the resources she has available. Information about the desks and chairs follows.

	Desks			Chairs
Selling price per unit	$	1,131.25		$	491.00
Variable costs per unit		440.00			280.00
Contribution margin per unit	$	691.25		$	211.00
Direct labor hours per unit		5	hours		4	hours
Expected demand for next quarter		176	desks		46	chairs

Santana has determined that she only has 1,012 direct labor hours available for the next quarter and wants to optimize her contribution margin given the limited number of direct labor hours available.

Required:
Determine the optimal sales mix and the contribution margin the business will earn at that sales mix. (Round per unit amounts to 2 decimal places.)

_	desks	chairs	totals
contribution margin per unit	$691.25	$211	x
Direct labor hours per unit	5	4	x
Contribution per direct labor hour	$138.25	$52.75	x

	desks	chairs	totals
max number of units to be sold	176	46	$1,012
hours required to produce max units

for most profitable sales mix
	desks	chairs	totals
Hours dedicated to the production of each unit
x	x	x	x
Units produced for most profitable sales mix
Contribution margin per unit
total contribution margin

Answer 1