Sandalwood Company produces various lines of high-end carpeting in its Ashville, NC plant. This question pertains to two different grades of carpet in its Symphony line: commercial and residential. The former sells for $16 per square yard, while the latter sells for $25 per square yard (wholesale). Variable costs are $10 per square yard and $15 per square yard for the commercial and residential grade products, respectively. On average, it takes 12labor hours to produce 100 square yards of commercial carpeting, and 18labor hours for each 100 square yards of residential carpeting. The number of available labor hours at the plant is limited to 4,600 hours per week. Current sales forecasts indicate that weekly sales for the commercial line and the residential line, respectively, are 30,000 square yards and 8,000 square yards. Fixed manufacturing costs, allocated to products on the basis of 4,600 total labor hours per week, amount to $1.50 and $2.25 for each square yard of commercial versus residential carpet, respectively.

Requirements
1. What is the gross profit (margin) for each of the two products, in total and per square yard?
2. What is the contribution margin for each of the two products, in total and per square yard?
3. Given the labor constraint and the product demand constraints, what is the optimum product mix, on a weekly basis, for each of the two products?
4. In general, what is the rule to be followed when attempting to determine the optimum short-term product (or service) mix?
5. What is the primary role of the management accountant in terms of addressing the short-term product (or service) mix problem?

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Product Selling price per square yard Variable costs per square yard Allocated fxed mfig costs per square yard Labor hours per 100 square yards Weekly sales forecasts (square yards) CommercialResidential S25.00 $15.00 S2.25 18 8,000 $16.00 $10.00 $1.50 12 30,000 Weekly labor hour constraint (total) 4,600