Faune Furniture Co. consists of two divisions, Bedroom Division and Dining Room
ID: 2542872 • Letter: F
Question
Faune Furniture Co. consists of two divisions, Bedroom Division and Dining Room Division. The results of operations for the most recent quarter are: Bedroom Dining Room DivisionDivision Total $768,000 $1,274,000 683,000 $591,000 $506,000 237,000 $269,000 Variable costs 446,000 Contribution margin- $322,000 (a) Determine the company's sales mix. (Round answers to 2 decimal places, e.g. 0.15.) Sales mix Bedroom Division Dining Room Division (b) Determine the company's weighted-average contribution margin ratio. (Round answer to 2 decimal places, e.g. 0.15.) Weighted-average contribution margin ratioExplanation / Answer
Solution:
Part 1 --- Sales Mix
Total Sales
Salex Mix
Sales of Bedroom division
$506,000
0.40
(506,000 / 1274,000)
Sales of Dining Room division
$768,000
0.60
(768,000 / 1274,000)
Total Sales
$1,274,000
Sales Mix for Bedroom Division = 0.40
Sales Mix for Dining Room Division = 0.60
Part 2 --- Company’s weighted average contribution Margin
Weighted Average Contribution Margin (for Company) can be calculated by two ways:
1) Weighted Average Contribution Margin (Company) = Total Contribution Margin for Company / Total Sales of Company x 100
= $591,000 / $1,274,000 x 100
= 46.39%
2) Weighted Average Contribution Margin (for Company) = (Contribution Margin Ratio for Bedroom Division x Sales Mix for Bedroom Division) + (Contribution Margin Ratio for Dining Division x Sales Mix for Dining Division)
= (269,000 / 506,000 x 0.40) + (322,000 / 768,000 x 0.60)
= 0.2126 + 0.2516
= 0.4642 or 46.42%
There is difference of decimal places. Please use whichever is correct.
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Total Sales
Salex Mix
Sales of Bedroom division
$506,000
0.40
(506,000 / 1274,000)
Sales of Dining Room division
$768,000
0.60
(768,000 / 1274,000)
Total Sales
$1,274,000
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