Curtis Brown 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. Curtis makes twig stands out of downed wood from his backyard and the yards of his neighbors, so his variable cost is minimal (wood screws, glue, and so forth). However, Curtis has to purchase wood to make his oak plant stands. His unit prices and costs are as follows: Twig Stands
Oak Stands
Sales price. . . . . . . . . . . . .Twig Stands $14.00 Oak Stands $32.00
Variable cost. . . . . . . . . . . Twig Stands $2.50 Oak Stands $8.00

The twig stands are more popular, so Curtis sells four twig stands for every one oak stand. Gabby charges her husband $ 490 to share her booth at the craft shows (after all, she has paid the entrance fees). How many of each plant stand does Curtis need to sell to breakeven? Will this affect the number of scarves Gabby needs to sell to breakeven? Explain.

Determine how many of each plant stand Curtis 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.
Twig Oak Total
Sale price per unit $ 14.00 $32.00
Less: Variable cost per unit $ 2.50 $ 8.00
Contribution margin per unit $ 11.50 $ 24.00
Sales mix 4 1 5
Contribution margin $ 46.00 $ 24.00 $70.00
Weighted average contribution margin per unit $ 14.00

Next determine the formula to compute the breakeven sales in units. (Abbreviations used: Avg. = average and CM = contribution margin.)

(Fixed expenses + Operating income) / Weighed-avg. CM per unit = Breakeven sales in units

Determine how many of each plant stands Curtis needs to sell to breakeven.
Breakeven sales of twig stands is units.
Breakeven sales of oak stands is units.