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

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%

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).