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%