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Steve Smith has found that Business Solutions' line of computer desks and chairs has become popular, and he is finding it hard to keep up

Steve Smith has found that Business Solutions' line of computer desks and chairs has become popular, and he is finding it hard to keep up with demand. He knows he cannot fill all his orders for both items, so he 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 $1,125 $375
Variable costs per unit 500 200
Contribution margin per unit 625 175
Direct labor hours per unit 5 hours 4 hours
Expected demand next quarter 175 desks 50 chairs

Steve has determined that he only has 1,015 direct labor hours available for the next quarter and wants to optimize his contribution margin given the limited number of direct labor hours available.

Question: Determine the optimal sales mix and the contribution margin the business will earn at that sales mix.

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