Serial Problem Business Solutions LO A1

Santana Rey has found that Business Solutionss 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	$	1,128.75		$	373.00
Variable costs per unit		490.00			190.00
Contribution margin per unit	$	638.75		$	183.00
Direct labor hours per unit		5	hours		4	hours
Expected demand for next quarter		173	desks		47	chairs

Santana has determined that she only has 1,001 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
Sales	$1,128.75	$373.00
Variable costs	490	190
Contribution per direct labor hour
	Desks	Chairs	Total
Maximum number of units to be sold	173	47
Hours required to produce maximum units	865	188	1,053
The company does not have enough hours to fill maximum demand.
For most profitable sales mix
	Desks	Chairs	Total
Hours dedicated to the production of each product	865		1,001
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin