The twig stands are more popular, so John sells four twig stands for every one o

ID: 2558935 • Letter: T

Question

The twig stands are more popular, so John sells four twig stands for every one oak stand. Katie John Anderson admired his wife's success at selling scarves at local crafts shows, so he decided to make two types of plant stands to sell at the shows. John makes twig stands out of charges her husband $360 to share her booth at the craft shows (after all, she has paid the downed wood from his backyard and the yards of his neighbors, so his variable cost is minimal entrance fees). How many of each plant stand does John need to sell to breakeven? Will this (wood screws, glue, and so forth). However, John has to purchase wood to make his oak plant affect the number of scarves Katie needs to sell to breakeven? Explain. stands. His unit prices and costs are as follows: E (Click the icon to view the data.) Determine how many of each plant stand John needs to sell to breakeven. Begin by computing the weighted-average contribution margin per unit. First identify the formula labels, then complete the calculations step by step Less:

Explanation / Answer

Answer

Calculation of Weighted Average contribution margin

Twin Stands

Oak Stands

Sales Price per unit

$18

$38

(-) Variable cost per unit

Contribution margin per unit

$15

$30

Sales Mix [ 4 twin stands for 1 oak stands]

Sales Mix %

[4/5] 80.00%

[1/5] 20.00%

Weighted Average contribution margin

$12

Calculation of Break Even

Total Weighted Average contribution margin

$18

[$12 + $6 calculated above]

Fixed Cost

$360

[given]

Total Units to be sold to Break Even

20 units

[$360 / $18]

Twin Stands to be sold

16 units

[20 x 80%]

Oak Stands to be sold to break Even

4 units

[20 x 20%]