Desks $1,223.75 Chairs $385.00 220.00 Selling price per unit Variable costs per
ID: 2479050 • Letter: D
Question
Desks $1,223.75 Chairs $385.00 220.00 Selling price per unit Variable costs per unit Contribution margin per unit Direct labor hours per unit 530.00 $ 693.75 $165.00 5 hours 175 desksS 4 hours 48 chairs Expected demand for next quarter 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. (Round per unit amounts to 2 decimal places.) Desks Chairs Sales Variable costs Contribution per direct labor hour 1,223.75 $ 385.00 220 165.00 530 693.75 $ Desks Chairs Total 175 48 192 The company does not have enough hours to fill maximum demand. Maximum number of units to be sold Hours required to produce maximum units 875 1,067 For most profitable sales mix Desks Chairs Total Hours dedicated to the production of each 875 140 1,015 roduct Units produced for most profitable sales mix Contribution margin per unit Total contribution marginExplanation / Answer
Computation of Contribution Per Direct Labor hr
Particulars
Desks
Chairs
Sales
$ 1,223.75
$ 385.00
Variable costs
$ 530.00
$ 220.00
Contribution margin per unit
$ 693.75
$ 165.00
Direct Labor hrs per unit
5
4
Contribution per labor hr
$ 138.75
$ 41.25
Rank
I
II
Desks
Chairs
Total
Maximum no of units to be sold
175
48
Direct Labor hrs per unit
5
4
Hours required to produce maximum units
875
192
1067
Available Hrs
1015
Less : Allocated to Product Desk for 175 units
-875
Balance availale hrs
140
No of units of Chairs can be produced @ 4 hrs per chair
35
Computation of Contribution Per Direct Labor hr
Particulars
Desks
Chairs
Sales
$ 1,223.75
$ 385.00
Variable costs
$ 530.00
$ 220.00
Contribution per labor hr
$ 138.75
$ 41.25
Desks
Chairs
Total
Hours dedicated to the production of each product
875
140
1015
Units produced for Profitable Sales Mix
175
35
Contribution margin per unit
$ 693.75
$ 165.00
Total Contribution margin
$ 121,406.25
$ 5,775.00
$ 127,181.25
Computation of Contribution Per Direct Labor hr
Particulars
Desks
Chairs
Sales
$ 1,223.75
$ 385.00
Variable costs
$ 530.00
$ 220.00
Contribution margin per unit
$ 693.75
$ 165.00
Direct Labor hrs per unit
5
4
Contribution per labor hr
$ 138.75
$ 41.25
Rank
I
II
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