Question

Arlan Arthur 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. Arlan 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, Arlan has to purchase wood to make his oak plant stands. His unit prices and costs are as​ follows: LOADING...​(Click the icon to view the​ data.) The twig stands are more​ popular, so Arlan sells four twig stands for every one oak stand. Gabby charges her husband $ 455 to share her booth at the craft shows​ (after all, she has paid the entrance​ fees). How many of each plant stand does Arlan need to sell to​ breakeven? Will this affect the number of scarves Gabby needs to sell to​ breakeven? Explain.

Arlan Arthur 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. Arlan 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, Arlan has to purchase wood to make his oak plant stands. His unit prices and costs are as follows: E: (Click the icon to view the data.) The twig stands are more popular, so Arlan sells four twig stands for every one oak stand. Gabby charges her husband $455 to share her booth at the craft shows (after all, she has paid the entrance fees). How many of each plant stand does Arlan need to sell to breakeven? Will this affect the number of scarves Gabby needs to sell to breakeven? Explain. 13.00 $ 2.50 10.50 30.00 7.00 23.00 Sale price per unit Less: Variable cost per unit Contribution margin per unit Sales mix Contribution margin Weighted average contribution margin per unit 42.00 $ 23.00 $ 65.00 $ 13.00 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 Arlan needs to sell to breakeven. Breakeven sales of twig stands is Breakeven sales of oak stands is 140 units. 35 units.

Answer 1

Fixed cost = $455

Weighted average Contribution margin per unit = $13

Break even point sales in units = (Fixed expenses + Operating income)/Weighted average Contribution margin per unit

= (455 + 0)/13

= 35

Break even sales of Twig stands = Break even point sales in units x Sales mix proportion of Twig stands

= 35 x 4/5

= 28 units

Break even sales of Oak stands = Break even point sales in units x Sales mix proportion of Oak stands

= 35 x 1/5

= 7 units

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