Outdoor Living specializes in outdoor furniture and spas. Owner Cheryl Homberg 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, Outdoor Living can display 50 patio sets. Alternatively, Outdoor Living could display 30 spas. Homberg expects monthly sales to equal the maximum number of units displayed.

Requirements 

1. Identify the constraining factor for Outdoor Living.

2. Prepare an analysis to show which product line to emphasize.

Transcribed Image Text:

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