Product mix under constraint (Learning Objective 5)

Easy Living of Charlotte, North Carolina, specializes in outdoor furniture and spas. Owner Linda Spring is expanding the store. She is deciding which product line to emphasize. To make this decision, she assembles the following data:

After renovation, the store will have 8,000 square feet of floor space. By devoting the new floor space to patio sets, Easy Living can display 60 patio sets. Alternatively, Easy Living could display 30 spas. Spring expects monthly sales to equal the maximum number of units displayed.
Requirements 1. Identify the constraining factor for Easy Living.
2. Prepare an analysis to show which product line to emphasize.

Transcribed Image Text:

Sale price.... Variable expenses...... Contribution margin. Contribution margin ratio........... Per Unit Spas Patio Sets $1,000 $800 480 440 $ 520 $360 52% 45%