Chapter 25, Problem 25SP

Santana Rev has found that Business Solution’s line of computer desks and chairs has become popular, and she is Ending 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......................... 11,125 $375
Variable costs per unit....................... 500 200
Contribution margin per unit.................. $ 625 $175
Direct labor hours per unit ................... 5hours 4hours
Expected demand for next quarter............. 175 desks 50 chairs
Santana has determined that she only has 1,015 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. Page 986