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. Selling price per unit Variable costs per unit Contribution margin per unit Direct labor hours per unit Expected demand for next quarter Desks $1,289.75 420.00 $ 869.75 Chairs $415.00 160.00 $255.00 7 hours 166 desks 6 hours 45 chairs Santana has determined that she only has 1,372 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 Contribution margin per unit Direct labor hours per unit Contribution per direct labor hour Desks Chairs Total 166 45 Maximum number of units to be sold Hours required to produce maximum units Total 1,372 For most profitable sales mix Desks Chairs Hours dedicated to the production of each product Produce most profitable units until the market demand has been satisfied. Units produced for most profitable sales mix 166 45 Contribution margin per unit Total contribution margin

Answer 1

в Desks $ 869.75 Chairs $255.00 Contribution margin per unit Direct labor hours per unit Contribution per direct labor hour Total S 124.25 Desks 166 1162 $ 42.50 Chairs 45 270 Maximum number of units to be sold Hours required to produce maximum units 1432 For most profitable sales mix Desks 1162 Hours dedicated to the production of each product Chairs 210 Total 1372 35 Units produced for most profitable mix Contribution margin per unit Total Contribution margin = units x contribution per 166 $ 869.75 S 144,378.50 $255.00 $8,925.00 $ 153,303.50

Working note:

Chairs Desks 869.75 255 Contribution margin per unit Direct labor hours per unit Contribution per direct labor hour | Total =C2/C3 Desks 166 =C6*C3 =D2/D3 Chairs 145 =D6*D3 Maximum number of units to be sold Hours required to produce maximum units =C7+D7 For most profitable sales mix Desks =C7 Chairs Total =E12-C12 1372 Hours dedicated to the production of each product Units produced for most profitable mix Contribution margin per unit Total Contribution margin = units x contribution per unit =C12/C3 =D12/D3 869.75 =C14*C15 =D14*D15 =C16+D16 255