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 Division Dining Room Division Total
Sales $500,000 $750,000 $1,250,000
Variable costs 225,000 450,000 675,000
Contribution margin $275,000 $300,000 $ 575,000
(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 ratio

Answer 1

Answer:

a)

Sales mix:

Bedroom division = 0.40 or 40%

Dining room division = 0.60 or 60%

b)

Weighted average contribution margin = 0.46 or 46%

Explanation:

a)

The sales mix is the proportion of sales of each product that the business makes relative to the total sales of the business.

Sales mix:

Bedroom division = 500000 / 1250000   = 2/5 or 40%

Dining room division = 750000 / 1250000  =  3/5 or 60%

b)

First we need to calculate the contribution margin ratio of each product.

Bedroom = 275000 / 500000  = 0.55 or 55%

Dining Room = 300000 / 750000  = 0.4 or 40%

The weighted average contribution margin can be calculated as follows,

Weighted average contribution margin = weight of Product A * contribution margin ratio of product A + weight of Product B * contribution margin ratio of product B

Weighted average contribution margin = 0.4 * 0.55  +  0.6 * 0.4

Weighted average contribution margin = 0.46 or 46%

Answer 2

A) The Sales mix:

The Bedroom division is = 0.40 or 40%

After that Dining room division is  = 0.60 or 60%

B) The Weighted average contribution margin = 0.46 or 46%

What is the Margin ratio?

A) When The sales mix is: the proportion of sales of each product that the business makes relative to the total sales of the business.

The Sales mix is:

After that Bedroom division = 500000 / 1250000   = 2/5 or 40%

Then Dining room division = 750000 / 1250000  =  3/5 or 60%

B) Firstly we need to calculate the contribution margin ratio of each product.

The Bedroom is = 275000 / 500000  = 0.55 or 55%

Then Dining Room is = 300000 / 750000 = 0.4 or 40%

After that The weighted average contribution margin can be calculated as follows,

Then Weighted average contribution margin is = weight of Product A × Then contribution margin ratio of product A + weight of Product B × contribution margin ratio of product B

After that Weighted average contribution margin = 0.4 × 0.55  +  0.6 × 0.4

Therefore, Weighted average contribution margin = 0.46 or 46%

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